Good morning, everyone. We're going to get ready to start here.
I'm Matt Rhoads, our Head of Investor Relations. Thanks for taking the time
to join us. I know
it's a busy week. We got Dreamforce going on. Our friends at Adobe, I know, report later today. In fact, on that note, while I'm bringing up the point, we do have some spots here. If you
guys don't have time to get from here
to where you want to be to listen to the call, just talk to Lisa on my team and we'll make sure you can listen to the call here if that's an option you want to consider. We did start earlier this year with that in mind. So we started at 8 not 8:30. Lunch is going to be over at 12:30. So hopefully, we'll all have time to cover everything we need to in the world of software today.
Welcome also to the folks on the webcast. The materials here are going to be available on our website a couple of hours after the show ends, including the video, so you'll be able to catch up on all this later. And of course, feel free to reach out to
me or anyone on my
team if you have any questions coming out of the day.
For the folks in the room, there are restrooms around
the corner. So if you go out beyond the food to my left, your right, and then turn the corner, you'll see the restrooms there. There'll be signs. So hopefully that's easy to get to. There's going to be a gallery walk at the break.
So we have some products like we normally do during the break for
you to check out.
It will be about a 15 minute break when we get there. And then for the hour during lunch, you'll be able to check out the products. We've got QuickBooks financing and then we show some of the connections between our Pro Tax product in QuickBooks Online and the new QuickBooks Self Employed and how that interacts with TurboTax or with do it for me type software that accountants use to prepare taxes. I will also cover maybe Let me cover this real quick first. I'm actually going to go to the next slide, though.
My General Counsel is actually here to present. She's going to talk about security and tax, so she's going to be very happy that I'm about to read this to you. Quickly, 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 2015 and other SEC filings, which are available on Investor Relations page of Intuit's website at intuit.com. We assume no obligation to update any forward looking statement. The information in this presentation is to outline our general product direction for online products, but represents no obligation and should not be relied on in making a purchasing decision. These presentations also 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. With that fun stuff out of the way, let me just run you through the
agenda real quick, and then I'm going
to give it to Brad. Brad will kick
it off. The agenda is set up a little differently this year.
It's set up around our 6 strategic priorities within the company. So we'll have some of the usual suspects, the GMs of our businesses will be here to present, but Taylor and Laura will also talk a bit about our technology focused priorities. Neil, of course, will talk about financials and we'll have about 45 minutes or
an hour for Q and A
at the end that Brad will lead. After that, please do stick around for the gallery walk. We have the products I mentioned out there, some senior leaders, a little different this time. We've got some senior leaders, VPs that work in those areas as well as some folks that know the products really well. So we'd be happy to walk you through that.
One last thing to point out, the gentleman from Cleveland
who lost his bet will be wearing
a Golden State Warriors hat for the duration of the Analyst Day.
And with that, I'm going
to hand it over to Mr. Brad Smith, our CEO. Thank you.
All right.
Good morning, everybody. I want to add my warm welcome to Intuit 2015 Investor Day. It's Good to see your smiling faces in the audience and everybody out there on the streaming video. As Matt just shared, we have a pretty full agenda in store you, but we're cognizant there's a lot going on today. Obviously, you've got the Fed, you've got some of our peer companies doing their earnings announcements, we have Dreamforce.
But we also know that after the earnings call we left you with some unanswered questions. So we're going to take the time today to try to make this a very engaging and hopefully a very productive session for you. So before we get started, let me step back and just reflect on the year. It was an incredibly busy and an incredibly exciting year at Intuit. It was a pivotal year.
It was a year that we crossed a major inflection point in our business model shift to the cloud and we also made several strategic decisions that strengthen our position as we look to the future. What we want to do today is we want to put those results and those decisions in the context and then to lay out for you the game plan we have in place that we think actually accelerates our performance as we look ahead. So I'm going to kick us off today and I want to start by first looking back at fiscal year 2015 and explain why it was such a busy, exciting and pivotal year for Intuit. And I'll start with our financial results. In fiscal year 2015, we delivered revenue, operating income and earnings per share above the high end of the guidance range that we provided 1 year ago.
We did exactly the same thing for our paid QBO subscribers and that was in spite of raising the guidance on that number in the middle of the year. So if you step back and you reflect on our FY 2015 performance and just look at financials, you would say, hey, it was a pretty bag on good year. But when you stack these results up against the financial principles that we hold ourselves accountable for, I would tell you it was a strong year, but it was certainly not our best year. While our revenue growth exceeded the targets that we have provided, underneath the hood, our assumptions around mix, desktops, migrators to QVO, as well as some attach rate assumptions that impact out years were a little bit off. And we hold ourselves to a higher bar than that.
And when you look at our operating income, while we exceeded our targets, we had some expense run rates, in particular SG and A for a much more streamlined and focused into it, but we're running a little bit harder than we think is a best practice. So in the middle of the year, we did some mid course corrections. And then finally, in capital deployment, I'll tell you, we have made a series of acquisitions that have strengthened our technology and our talent. But we've also had some acquisitions that didn't perform up to our expectations. Most recently evidenced by in Q3, we shut down some non strategic channels in our Chek acquisition, the mobile bill pay capability that we bought.
And by shutting those down, we took an impairment charge. So when you put it all together, I would tell you we had a strong year in fiscal year 2015, but we know we can do better. And what I'm going to do is I'm going quick to meet the financials and share with you the areas that we see are really building momentum inside the company, but also areas where we exited the year wiser and honestly committed to getting better. So let me talk about what went well. This past year, we really sharpened our strategic focus.
We narrowed down on 6 key priorities that we believe will accelerate our company's performance and set up the next chapter of great for Intuit's history. Now while we were making these changes, which included divesting some very good businesses, the businesses that don't fit with our future, as well as finalizing some restructuring, particularly in small business, which was still operating with the general manager of payroll, a general manager payments, a general manager with QuickBooks, and we said, no, now they're one small business ecosystem. That's a lot of construction going on inside the house, a lot of dust being stirred up. Despite all that going on, we delivered excellent results with our products this year. You may remember in 2012, we said we had lost a little pride in our products.
We felt they had become me too. So for the last 3 years, we've been committed to building excellence back into our product. And this year, we saw it. Our conversion rates, our retention rates, our net promoter scores improved for every single core product in the company. I haven't seen that in my 13 years.
Now while that was going on, no other bit more evidence was in our small business group, where QBA subscribers crossed the 1,000,000 subscriber milestone on June 2, and we exited the year with our 9th consecutive quarter of accelerating paid subs growth at 57%. Now look at the tax business and you saw the similar thing, but you remember the tax season was fraught with all kinds of press releases, all kinds of news clips, all kinds of concerns about a very important issue that's facing the U. S. Tax system, which is tax fraud. But despite all of that, our team stepped up.
We expanded the digital tax category. We grew our customer base. We took share from the competition and we exceeded our top and bottom line guidance for that business as well. So when you put it all together, that delivered the results that just went through, the financial results. But what's really encouraging is the green shoots that we see happening as we exited the Q4 and entered the 1st month of this new fiscal year.
So some very strong early indicators of what it's looking like is going to be a better future in 2016 and beyond. At the same time, I'm going to tell you we exited wiser. We know there are things we can do to get better. And let me start with this first one. After 32 years of being in business, one fact remains unchanged.
The number one source of new customers is a recommendation from an existing customer or an accountant. And the way we earn that user rating, that app rating or that word-of-mouth recommendation is by delighting every individual customer. When they make a purchasing decision, the product delivers the benefit they expected and exceeds their expectations. It's backed up by quality customer support experience. And increasingly, now that we're in a multi platform world where you have devices like tablets and phones, we are reducing friction between our own products and third party products working across multiple devices.
That is a big focus and that's going to be a theme you hear about throughout the rest of the day. The second is M and A. We've made 16 acquisitions in the last 2 years. The majority of those have met and exceeded our expectations. But we've also started to see a pattern in the ones that haven't performed as well.
And let me decode that for you now. Quite simply, if it strengthens our small business and tax ecosystem, our batting average is very high. If it's a standalone business that's a bolt on, it doesn't have immediate synergy and value with QuickBooks or with Tacx, we struggle. That has informed our go forward approach to the kinds of acquisitions we're going to do. The third, we have really strong momentum right now in growing our customer bases, But we have room to improve in getting our assumptions right around the mix of desktop migrators to the cloud, the number of who are going to attach services day 1 versus maybe 6 months down the road and also starting to look at new monetization models as we start to connect some of our products like QuickBooks with TurboTax.
So that's an area we're going to continue to improve. Dan Wernicoff and Neil are going to explain our lessons learned around average revenue per customer, but why we are so confident about the future based upon the learning we got this year. Tax, we know last year was a challenging year for the entire tax industry, but no one is innocent enough and naive enough to believe that it's a one and done. So we are committed to innovating and leading and working with the IRS in the States and the rest of the industry to get cyber criminals out of the U. S.
Tax system. You'll hear more about that as well. This last one is certainly not the least one, a multiyear outlook, as evidenced by the confusion that was left after the earnings call and the questions that were left unanswered. Again, that's on me. I'm fully accountable.
And what I want to do today is I want to take a minute and explain to you what we provided a year ago as an outlook for fiscal year 2017 when we made the shift to ratable revenue and then what we attempted to try to explain on the earnings call several weeks ago. And I'm now going to try to take an opportunity to do a better job of bridging that gap. And then Neil is going to walk through this in a little greater detail with you later today. So coming off of the earnings call, there were 3 questions that I heard very clearly from you 1 on 1 as well as in the Q and A session. The first, hey, if you just exited your 9th consecutive quarter of accelerating QBO segment growth, why did you not change your outlook in fiscal year 2017, which was set at 2,000,000 subs?
Well, we have put a greater than sign on the fact sheet. That's about as obtuse as you can be. So what we did this morning on the earnings release is we shared that we see 2,000,000 being below end of the expectation and we see several 100,000 more potential subscribers if we execute well. So you'll see that range has been adjusted. The second is you had originally given us an outlook of $5,800,000,000 in revenue in fiscal year 2017 when you made the shift to ratable.
And then on the call, you explained $350,000,000 of that will now be pulled out because of the 3 assets that we've classified as assets held for sale. That's Quip based Quip and in Demandforce. But when I do the math, I can't quite see how that gets to pushing it out a year or so, which is what you and Neil said on the call. You're right. $350,000,000 is just one of the 3 levers that we've adjusted in our revenue outlook.
In addition to that $350,000,000 there was another 100,000,000 dollars associated with the non strategic channels we shut down in the check business in the Q3 when we took the impairment charge. Well, it is non strategic channels. We actually had teams calling on PG and E and New Jersey powered and lie trying to sell standalone bill pay into an enterprise company to get bill pay. That's not who we are. It doesn't strengthen the QuickBooks ecosystem, so we shut it down and we pulled the $100,000,000 out of the outlook.
So we have $350,000,000 in assets held for sale, another $100,000,000 in the non strategic channels. And then the last $200,000,000 quite frankly was just bad assumptions on our part. We were overly aggressive in the attach rate assumptions in QBO, how quickly we can get payroll and payments attached, particularly outside the U. S. And we had also built a price increase into our pro customer base in the out years that we don't think makes strategic sense, especially as we ask accountants to help small businesses succeed.
So we put that all together and you're going to get it actually laid out a little bit later in more detail, dollars 350,000,000 assets held for sale, dollars 100,000,000 non strategic channels, shutting down the channels that didn't make sense, dollars 200,000,000 quite frankly, a learning curve as we make this business model shift to the cloud and the fact that we think it's going to play out a little bit further out than what we thought, but not that much further out, it's about 12, 13 months. You put that all together at $650,000,000 to $700,000,000 which takes me to the last point, dollars 5 in EPS, okay? I think I heard you say on the earnings call, you moved off the $5 but then I think I heard you say that you could still see a path to $5 What is it? Well, for those who have been following the company, dollars 700,000,000 adds up to about $1 in EPS. It's not $4 We said 5 a year ago, it's not $4 This morning, we set an earnings announcement out to sit at between $4,000,000 and $4.50 but what we're going to walk you through is what are the levers that move you up in that guidance range and the choices that we're going to be making that enable us to continue to drive closer to the numbers that we think are healthy for the company, both short and long.
So I know that there's a lot of math and this is 1 of 2 slides that I'm going to spend the most time on. I'm finished on this one, but that's one to fund me. Lesson learned, fully accountable, we take our commitments to ourselves seriously, we take our commitments to you seriously. But the other question I got, so with all that, I didn't hear a change in your tone. You sound optimistic, you sound confident, are you tone deaf?
And I'll tell you, no, I've never in 13 years been more confident. I'm standing before you today and telling you with clear eyes and a full heart that we have more momentum and a stronger position than we have had in our 13 years that I've been with the company. And what I want to do is I want to walk you through why I feel that way and why the management team feels that way. And it begins with the transformation that we have made about 80% of the way through in terms of the restructuring, the reorganization and the refocus. And it began in fiscal year 'twelve.
In fiscal year 'twelve, we stood in front of you and we said we see the early signs of the once in a generation platform shift that we think is going to accelerate our category growth and enable us to take share. And it is going to require us to transform who we are as a company. There were 4 drivers. The first is the era of social or user contribution. End users no longer want to be consumers, we want to be participants.
We choose the news feeds, the ringtones, the apps on our devices. And if you want to compete and win, you have to change not just being a great product company, you have to become a great product and an open platform company that enable an end user to personalize the product just right for them and the 3rd party developer to add value while we sleep. The second key shift is the area of the cloud. The cloud has no borders. The borders between geographies have come down.
The expectations that apps will work well across multiple devices has become the norm. And we had to transform from a North American desktop software company into a cloud software company into a cloud driven global services company. So we took QuickBooks Online toward down to the ground and rewrote it bottoms up to be a global enabled platform. The 3rd idea of mobile. I will tell you our perspective is the mobile experience has won.
2,007, the computer moved from the desktop to the palm of our hand in the form of a smartphone. It then moved to a tablet. Now it's wristwatches, eyeglasses and automobiles. And we have worked very hard for the last 3 years to make sure that every one of our product experiences are optimized in
a mobile first, mobile only world.
And the last is data. As evidenced by this past tax season, the most important thing you've got to do is protect the data. And we have lots and lots of very important data. And once we've protected and secured it, which is our top priority that we do every day, we can use that data to do magical things. And the biggest thing that's happening right now with this platform shift is for 25 years, everyone grew up in a paradigm of never enter data twice.
Type it in once into your software, whenever it connects with the bank, it will flow and do everything. We're now in a world of never entered data at all. The possibility of never having to answer a question to get your taxes done and never have to think about the T account and get your accounting done. And that's the vision we're on. So we're trying to do new things with data that make our products easier and deliver better value.
Those things have been what we've been focused on and we've been transforming the company. What's it required us to do? Restructure away from business units into 1 ecosystem, sell businesses like Digital Insight, Healthcare, Quicken, Quickbase, Demandforce that don't strengthen the ecosystem and even change our accounting model last year to ratable revenue so that we can make it easier to delight customers today and get them used to subscriptions tomorrow. That's been a lot of work. And I'll tell you, the proof points are there.
We've been navigating this business model shift as we leaned into the cloud. Our customer base has grown 11% compounded annually in the cloud based services by these elegantly managed to desktop decline. So our total base is growing. The second is our connected services revenue was up 1100 basis points since fiscal year 2012. Over 7 percent of our revenue now comes from these services.
And of course, our global acceleration continues to build over 120%. But what makes me most excited is what it's created as a foundation as we look ahead. Today, we are positioned as 1 Intuit, not the TurboTax business, the QuickBooks business, the Payload business, the payments business, but 1 Intuit. And everybody in the company has this common game plan, this plan on a page. And what I want to take a few minutes now walking you through at a very high level is our game plan and I'm going to spend a little bit of time on one page in particular, which is what's changed in our strategy.
Then I'll wrap up and hand it over to Mr. Warnekopf. So of course, our game plan began 32 years ago at a small kitchen table at Scott Cook's house when he watched his wife, Sydney, struggle to balance the family checkbook and he said there has to be a better way. And for 32 years, employees with Intuit Badges have gotten out of bed with this sole purpose in mind, to improve our customers' financial lives and to do it in such a way they can never imagine going back. And that kitchen table sits right out in the hallway, so every employee who comes in here knows that's the reason why we come to work.
That mission gave birth to a company that has been durable. As the logo reinvent itself, and yes, was born in the era of DOS and we're proud of it. Because we went from DOS to Windows and Windows to the web. We went from the web to the cloud and the cloud to mobile devices and big data and we have seen wonderfully gifted competition along the way and we remain standing and we remain constructively dissatisfied that we can do even better. That mission and those values focus all that energy, all that talent, all that innovation that our employees bring every day against a common set of goals.
We call these true north. I've shared them before. This is how the Board assesses my performance. This is how every employee in the company has their performance assessed. It has two dimensions.
We're not only held accountable for the results we deliver this fiscal year, but all the Senior Vice Presidents and above have the same comp plan I do, they're tied to delivering the next 3 years. Our options and our issues are tied to whether we hit all 3 years of our 3 year plan. And so it's a short and long component. And then we have to deliver results for all the stakeholders. Do we have a great environment for employees?
Are we growing the products and making them better for customers? And are we delivering the commitments we made to you? There's one change here. Over the last few years, we've moved from being just a product company to now a product and platform company. So this past year, we introduced a 4th stakeholder with your partners.
You all know the partners that we work with, they're 3rd party software developers, who 2 years ago, we had 60 apps. Now we have over 1300 apps working with QBO. The 2nd partner group are accountants. They not only buy our products like our Pro Tax products, they are really responsible for helping small businesses make the decisions around accounting and payroll. And yes, we are partners with the IRS and the state departments of revenue as we try to get cyber criminals out of the tax system.
So that is our way we measure success. Clear mission, a set of values, clear definition of success. Take us to our strategy. I'm just going to take about 5 minutes on this page. This is the one that I'm just going to pre warn you is the 2nd page that I'm spending a lot of time on, because I want to tell you what hasn't changed and then what we're doing differently as a result of the restructure.
This is the slide we shared with you in fiscal year 12, 3 years ago. We called it Project Bold, moving away from siloed business units to one into an ecosystem where the whole is greater than the sum of its parts. At that point, it's never been narrowed in on 3 customers, small businesses, consumers and accountants. And we think that many of the things they do are 2 sided problems. And if we solve both sides of the problem, we can create a network effect, a viral growth business that will accelerate exponentially.
To get that going, we narrowed in on 2 strategic outcomes to do the operating system behind small business success and to do the nation's taxes. And we said the 3 strategies at the bottom that would power that is we have to continue to delight customers with awesome products, but increasingly in a mobile world. Those products have to be open platforms that enable the contributions of others. And finally, we're going to use data as a competitive source of differentiation. That has been our strategy for the last 3 years.
But as a result of the last 100 days, while we're looking for homes for 3 very good businesses, but they do not fit the future and we did the final restructuring in small business to move into 1 ecosystem, this is now how we represent the strategy. I'll let it build. It's kind of one of those WYSIWYG things. Beautiful. Look at that.
Wow. What hasn't changed? The same 2 core strategic goals at the top, the same 3 customers and the same three strategies. But let me tell you how we're now positioned to deliver differently than we were 100 days ago and certainly 3 years ago. So the first strategy at the bottom is delivering awesome product experiences.
Remember when I kicked off the session and I looked back at fiscal year 2015, one of the things I said we know hasn't changed is you earn those recommendations from customers, one customer at a time. To do that, you have to deliver something called the customer benefit, what they thought they were going to get when they bought the product. Let me tell you what small businesses are looking for. They're looking for a chance to succeed. 1 out of 2 fail in the 1st 5 years.
They buy 15 to 20 different apps try to increase their eyes of success. They have 0 interest in understanding accounting. That's not why they started small business to become an accountant. They just want to improve their cash flow, make smarter decisions and be successful so they can send their kids to school. So it's very clear what Van Wernacoff and the team are focused on, get the accounting done without having to worry about it at all, help you improve your cash flow and help you get access to information and make smarter decisions.
The consumers. The reality is 70% of consumers and families live paycheck to paycheck. The biggest paycheck they get all year is a tax refund. And they have to go through 6,000,000,000 hours in aggregate of tax prep drudgery to get to that refund. And then once they get that money, they have obligations called bills.
And because they're trying to manage their cash flow, buy their groceries, live a life and still pay their obligations, in aggregate, there's $60,000,000,000 of late and overdraft fees that consumers pay every year. All they want to do is stretch that dollar. And so our consumer products are designed to get the taxes done, no risk, no worry, no effort, get the bills out of the way and help you do a better job of planning and living a better life. And then the last are accountants. And the accountants product is their time.
89% of small businesses say they're more successful if they work with an accountant. The challenge is this, accountants have 60% of their customers are small businesses, 40% of their customers are consumers. And they get data from them in paper and pencil and shoe boxes and Excel spreadsheets and they spend 130,000,000 hours a year collecting that data and entering it. Our goal is to help them save time by making that flow automatically into their tax return, so they can now spend more time working with more clients to make a difference. So the very first thing we did in the strategy is to be clear that every single product we build has to deliver these things.
This is how we're measuring success. The second part of our strategy is now enabling our platform to solve two sided problems, something we could not do 3 years ago. I want to give you two examples here. At the top of the page, where the blue meets the red, small businesses and consumers. I said small businesses have to improve their cash flow.
60% of them generate cash flow by sending an invoice and then getting paid. These invoices often get printed out of QuickBooks, stuck in the mail and they're paid 48 days later. Remember in July of 2013, we were talking to you in the fall, we said we're going to introduce this new thing called the Intuit Commerce Network, where we can e invoice somebody and then they'll click on a button and pay them back. In July 2013, we had 0 e invoices being sent out. In July 2015, dollars 13,000,000 a month and small business of getting paid in less than 10 days And it is growing in a hockey stick fashion.
But that's one half of the equation. What about the consumer who has to live paycheck to paycheck? Why am I so excited to pay you faster when I'm trying to stretch my dollars? Well, when you look at the consumer, they're saying, hey, I want to pay my bills, I don't want to pay overdraft fees, but I need to know if I've got enough money to still do things up by grocery. That's why we bought check.
Take that mobile bill pay capability, put it together with Mint and give a consumer the ability to see what bills are due, which ones they should pay first, just click on the phone and pay the bill and still know what the rest of their money looks like. So that's what we're trying
to do is create a
2 sided network now and you're going to hear it lean into that. That example at the bottom left is between the blue and the green, the accountants and the small business. C. C. Is going to talk about this, but in a headline, here's the reality.
The average accountant gets 4 new clients a year because they're so busy keying in data and collecting data out of shoeboxes. We have millions of small businesses, hundreds of thousands of accountants and we can become match.com and just start introducing them to each other. And then by clicking on a button in QuickBooks, we can download all the data into the accountant tax return and we save 1 hour for every small business return, 11,000,000 hours across the tax season. And that's just V1. So those are just two examples of how we're starting to solve 2 sided problems.
The last piece on this page that I'm going to explain is how we use data. Not only are we using data to do things that take stuff out of QuickBooks and do it into the tax return to the accountant, but there's 2 other examples. This morning, you saw a press release about us being a part of a fund with our debt capital to enable small business financing. You know the facts, 6 out of 10 small businesses apply for a small business loan, they get turned down. We can use the data in QuickBooks.
We've increased that 60% decline rate to a 70% acceptance rate. We've fulfilled for over $200,000,000 worth of loans. We've seen enough to believe and now we're leaning in aggressively. By the way, the lenders love it and they're signing up and trying to get on the platform because it reduces the risk for the small business loan, two sided problem. The other one is with consumers.
Today, consumers are trying to take advantage of low interest rates to refinance their home and to buy their first home. But the average mortgage application has 125 questions.
So they slog through as
many of those questions as they can, many of them drop off and just forget it. But once they go through it, then go to another lender and see if they can shop the rate, but they have to do the same $125,000,000 and you can't cut and paste. So they have to do it all over again. So they often don't shop multiple places, they don't get the lowest rate. In the meantime, the lenders are frustrated because they drop off that funnel conversion drops off to very few people making it through.
Well, the data sits in TurboTax and 75% of our customers have been willing to say download my data out of TurboTax and do that mortgage application for me. They're getting lower rates and those people working with us, the lenders are getting a 10 point improvement in conversion. So we're getting a lot of demand on both sides. So there's a lot in there. The headline here is the same 2 strategic outcomes, the same 3 customers, the same three strategies, But because of the restructuring we've done and turning our products into platforms, we are now starting to solve 2 sided problems in ways that no competitor can match because they don't have the assets that we have.
How you bring it to life? It's presenters are now set up to present the rest of the day. You're going to hear about each of these priorities. We've not already explained them, so I won't walk through them. But if you put a bow around this, we have a very clear game plan on one page.
Every employee in the company knows from our mission to our metrics what we're solving for, how we're measuring success and how their work fits in. But I will tell you, this is a company transformed. Our technology has been re architected and our focus has never been clear. And what this means for us is we can now do things and go after new markets we couldn't go after 3 years ago. And I'll finish with this.
Because of this transformation and what we're seeing in the market, we are expanding our total addressable market. Our categories are now growing faster than they were growing just a couple of years ago. Why? Because the cloud enable is enabling us to reach new customers and have them make risk free decisions, try before you buy. And so it's enabling us to bring customers in.
And this is not a spreadsheet exercise, team. This is not a consulting gig. These are real end market results. And this is why we have the confidence we have. How do I demonstrate our categories are growing?
Well, today, 6 out of 10 new customers making a QuickBooks purchase decision are now choosing QuickBooks Online versus desktop. If you remember last year, it was 5,149. We saw the same hockey stick start to happen in TurboTax in 2,005, it's kicking in in QuickBooks. That hockey stick, by the way, now has 9 out of 10 TurboTax TurboTax customers buying TurboTax online versus desktop. What that means for the category is this, you go down to the bottom, we always fill over 80 in the Q4, 84% of QBO customers that are new are also new to the franchise and new to the accounting software category.
So we're growing the category. And in tax, you all know from the IRS data, the digital categories that aren't growing assisted 3 to 6 times faster for the last 10 years. So the cloud is driving this change. It's also enabling us to serve customers we couldn't reach before. This new shadow economy or shared economy or gig economy, the drivers for Uber, for Lyft, the people who work at DoorDash and TaskRabbit, For years, as they've been working these gigs, they view it as a little extra money.
The government views them as a small business. And so come tax time, it's a mess. Well, we launched QuickBooks Self Employed in tax season, and we're now able to reach them and they can actually swipe left if it's tax return, depending upon which one they want to do. And we've got the accountant's tax return depending upon which one they want to do. And we've got 30% of those customers signing up for a monthly subscription.
Let me tell you why this is important. We've been in the tax business for over 2 decades. We have dreamed every year, how could we have a reason to talk to a TurboTax customer when it's not April before April 15? And they don't want to deal with us if they're not thinking about taxes. They're now signing up for a monthly subscription and this is a way for us to have a year round relationship with our Cox customers.
That is one big lever. The second big lever the cloud is enabling us to do is to start to make new connections in our ecosystem and it shows up 2 ways, increasing attach rates of services and new two sided problems we can solve well. I just covered this information, so I won't belabor it. You heard on the earnings call, for every new QBO customer, 23% are signing up for payroll and 11% for payments, and that payments number was 9% just last quarter. And there's 2 sided problems to the ones I just walked through on the strategy slide, connecting small businesses and accountants, small businesses sending invoices with consumers paying on their phone or getting access to small business loans and mortgage applications, things we couldn't do before.
And then the last is, of course, the cloud has no borders. So we're now moving into new markets. For years, we've told you 29,000,000 prospects for small business. We've added 43,000,000 more by moving into 6 countries. And we just introduced QuickBooks Self Employed, we announced we're going to move it into the UK, which is another 4,000,000 dollars So when you look at the slide in your deck, it summarizes it all.
But what I hope you hear is because we have made this transformation over the last 3 years, we are now positioned to capitalize on a total addressable market that's 2.5 times bigger than it was just 3 years ago and we have real reasons to believe with end market evidence, not spreadsheets, but real proof and traction in the market. So I'll summarize with this. It's been a lot of change. It's been a lot of change to execute inside the company. It's certainly been a lot of change to follow if you're following us outside the company.
But what I hope you see as of this overview and what you're going to hear from the other leaders is that we've taken the time to restructure ourselves, divest assets that are good businesses that don't fit with our future and even change our accounting model so that we can make this migration happen. Fiscal year 'fifteen, it was green. We exceeded every one of those outlook numbers we gave to ourselves and to you. We've worked our way through this transition period. We're on the other side of an inflection point and we now see an opportunity to accelerate our categories and our share, make new connections and increase attached services and enter new markets in a way we could not have done just 3 years ago.
That's why I'm confident. What I want to do now is unpack that confidence and let you hear from each of the leaders to tell you how we're going to deliver these results. So with that overview, I'm going to introduce Dan Wernicoff to walk you through the first of our 6 strategic priorities. Thanks.
All right, good morning. I'm going to walk through what Brad just talked about the winning worldwide with QBO Ecosystem. So really focusing on our online business, but it's important before I do that to talk about the big platform shift that's happening within the small business group. And that means backing up the plane and looking at some of the data around where our customers are going when they come into our franchise. And you can see that right here, it's pretty clear.
Our paid user base overall is growing, but where they start is changing. And Brad talked about last year when in the Q4, we had the Q1 ever where we had more new users starting with QuickBooks Online and it's accelerated since then. Overall, we're now seeing about 60% of our new users starting with QuickBooks Online versus the desktop. And as you look into this year, we're already seeing that continue to accelerate. So this is a trend at this point, which has already left the station and we expect it to continue to grow.
But on the right hand side, you see something a little bit different, which is the revenue mix. And as we're making this transition, it's still very important that we keep an eye on our desktop business and manage it and continue to grow that base and manage the base and keep them happy. 3 quarters of our revenue is still on the desktop business. So let's talk about that really quickly. So if you think about the desktop business at about $1,700,000,000 in revenue, it remains stable.
And if you remember last year, we talked about an acceleration in migration. It hasn't really happened. We've had growth in migration. We did over 100,000 customers who moved from the desktop to online and that was about 50% growth a 50% growth year over year. But that was less than we expected.
And as we look at the business and try to understand why that's happening, there's a couple of things that are driving that. One is accounts have been slow to move their customers online. And I'm going to talk later about that, because we're starting to see some green shoots there. The other thing is the desktop product and the online product are different. And there are feature differences between them that would inhibit a customer from migrating over.
And I'll talk about that as well because we have new features coming in QuickBooks Online that will make that bridge a little bit narrower. And there's also data migration. And data migration is the gnarly part of taking what's in the desktop and making switching costs near 0 because you can click a button and move your data over and begin to operate in the new application. And there's still work to do there as well. But probably the biggest impediment is that the desktop product is a great product, a really sticky product and customers love it and have built their business around it.
They've trained their groups. They have a relationship with an accountant. It works. And so we're starting to see something that we didn't expect, which is they aren't migrating as fast, but they're also staying active. And they're staying active on the desktop and the mix of our desktop business is changing dramatically.
So if
you were to go back 5, 10 years ago, you'd be looking at our business and looking at unit purchases of QuickBooks Desktop and thinking about the success of our business being driven off of those unit purchases. Today, the composition is very different. If you look here, we have about 90% of our business is recurring and it's driven by payments, payroll and actual subscriptions to QuickBooks Desktop, whether that be through our Plus SKU or our Enterprise SKU. And so while people are staying in our ecosystem and probably repurchasing less and less over time, which we're starting to see in fact over the last 3 or 4 years, we've seen the repurchase cycle move about 4 or 5 months out.
The fact of
the matter is the bulk of their revenue of the businesses is still going to remain with services revenue and subscription. The last piece is, as you see units go down, but you see the base remain, the base is aging very gracefully. In fact, they're becoming bigger, more mature businesses and they have more employees, they do more charge volume. And so we expect to see revenue per customer continue to go up. Now in this case, there are opportunities where we still are ourselves developing desktop solutions that grow along with the customer base.
So a good example of that is our enterprise business, where we still do quite a bit of development in terms of doing things like advanced reporting, advanced inventory, advanced pricing and we've moved that business to a complete subscription business and that business is growing very healthy and will drive ARPC of the overall desktop business. So I would say as an end cap here that the desktop business is aging very gracefully. But as you saw at the very beginning, it's not being replenished by new users. New users are moving to the cloud. And so the future of our business is the cloud.
And Brad talked about this, when you become an operating system behind Small Business Success, what that really means is you're transforming from an app to a platform. And so we're really investing heavily in this single code base. This code base that allows us to do different things like take our product global and personalize it for specific and smaller businesses. And Taylor is later going to talk about some of the technology behind this that helps you understand how fast we can move as a platform versus an application that has to branch and launch in different geographies. 2 things that happen when you become a platform.
1 is, you should have an expectation that everything integrates and it's not just our own stuff. It's not just our payments and payroll solution, but 3rd party applications become very important. Brad talked about the 10 to 15 apps that a small business has. Well, all of those need to seamlessly integrate with our application, which is QuickBooks. The second piece is you also need collaboration.
Everything is becoming a collaboration platform online and QuickBooks is no different. It's collaborating off of your financial data and the main partner that you have is accountants. And C. C. Is going to talk about some of the things that we're doing collaboratively with our tax business, which is helping unlock and advise between make the relationship between an accountant and small business and advising relationship versus just a simple data entry and tax business.
The final piece is personalization. As a platform, we now have access to data, we have access to users who can contribute on the behalf of our small businesses. And so we're seeing our product get smarter and smarter. We now have the ability to see what our customers are doing on a daily basis and adjust the product. We have the ability to look at businesses just like them and auto configure the product.
And so there's a big transformation happening in terms of how we build our application. Becoming this platform is allowing us also to go after additional TAM. So Brad just walked through this, but clearly global is a key strategy for us. If you would ask us a couple of years ago how many businesses can we address, we would have talked about the 15,000,000 businesses in the U. S.
That look like QuickBooks customers, but aren't using it. Now we've expanded that market to be on the U. S. And we're starting to see and have access to $60,000,000 $65,000,000 additional businesses, so 3x the market that we had in the U. S.
Today, we are in 5 focus countries. By the end of the year, we'll be in 7. Those 7 countries are 7 of the top 12 GDP countries in the U. S. Each one of our focus countries that we're in right now this year grew greater than 100%.
Our fastest growing country, Australia, grew 3.70 5%. And so we're starting to see some stable progress when we think about our global offering. On the right hand side, you can see now we're starting to attack a different type of small business that's emerged. So we've always wondered why we weren't able to get after the 30,000,000 small businesses in the U. S.
And only adjust the 15,000,000. And it turned out those other 15 were very simple self employed businesses who had different needs than the complex small businesses that use QuickBooks Online. And that's why we've developed the self employed version of QuickBooks Online. Now if you look at some of the numbers here and these numbers move around a lot, we expect that there's about 30,000,000 to 40,000,000 small businesses that are self employed in the U. S.
Then additional small businesses in the U. K. As well. But if you look across every country, this is a dynamic that exists in every geography that we enter. And so we assume that this will be driving TAM in a different way than we've ever been able to reach before.
Now if you unpack that and you think about what has that driven in terms of business results, 9 quarters of accelerating QBO base growth, we crossed over the $1,000,000,000 mark in June of this year. It took us 7 point half years to get to the first 100,000 customers. In the last 3 months, we got our last 100,000 customers. And we're not necessarily seeing this decline at this point. We're starting to see a different type of customer base and mix move in, and I'll talk about that later.
But this is real strength that we're seeing in the business. Also, I talked about the 60% of new users choosing QBO, 20% of our acquisition now is tied to non U. S. And self employed. And so the composition of our base is changing.
As you think about that composition, you think about the 2 big priorities that I mentioned, you can see the performance here. On the left hand side, it's our global expansion. If you were to go back 10, 15 years ago, we had made attempts to reach the global market through our desktop product. And what we found was it was very different difficult because each product had a different code base, each product had a different approach to going to market. And so if you were then to go back 5 years, what we tried to do was make a completely unique product for every market.
In both cases, we were unsuccessful. At this point, we feel like we found the right playbook, which is single code base, online product, a pretty standard playbook in terms of how we reach the market. And over the last 12 months, we've doubled the size of the base at 100,000. So good progress here and we're about to add 2 more countries, Brazil and France by the end of this year. So strong progress globally.
And what's interesting as you look at the right hand side, self employed, which we launched in January this year, we're up around 25,000 customers or subs at the end of the fiscal year. This looks very similar to the base that we had in 2013 globally, except for a better glide path at an earlier point. And so we're starting to see the green shoots here. We just have launched it essentially in the U. S, already has a strong Net Promoter Score and we're seeing strong attach to TurboTax, as Brad mentioned, haven't yet connected to our own accountant ecosystem, but we're about to do that at the end of the year.
So good green shoots there too.
So all of
that is changing our mix. When you start to look at our business, not only do we have a platform shift from desktop to tenure of our customer base because we're seeing this accelerated growth of new users as well as a different mix because we're moving from more established businesses in the U. S. To self employed businesses and global businesses for QuickBooks Online. So a lot of moving parts here.
And if you think about it as a sequence, at the very top, we're really driving new users into the franchise. So 80% are coming in new versus 20% migrating, which is changing the composition of our So 50% of our worldwide QVO customers have a tenure of less than 1 year, which is pretty dramatic change in our mix. Now what's important as you start to think about that mix change is still separating out so you guys can feel confident that we're not degrading the base, what's happening in the core U. S. Market with QBO.
And there you can see that while we've been growing, in fact last year the U. S. Market grew 32%, This year, it grew 42%. So there was a pretty strong acceleration. The ARPC remained level in the U.
S. So there was a lot of confusion around whether or not we're just deeply promoting the product in the U. S. In fact, our promotion strategy has not significantly changed year over year. What has changed is the composition of some of the global units.
And you can see underneath that our AR ARPC of QBO in the U. S. Is 4 times that of our ARPC of self employed and some of the global offerings of QBO. And there's a couple of things that drive that. As we enter new markets globally, we will promote deeply.
And that's part of introducing a product into a market and it's part of getting accounts to trial the product. Also, we don't have our whole ecosystem there. So in some cases, we partner for the payroll solutions. In some cases, we partner for payments. In some cases, we have neither.
And so there are opportunities and you'll see on our roadmap to continue to bring our whole ecosystem there, which is our playbook as well as self employed has just launched and doesn't have the same level of attached services either. And so in a lot of ways, it's what we expect that the mix is going to change and the RPC is going to be lower and it's going to evolve. And in fact, when you start to look at how we've monetized our base today, that's exactly what we see is in the 1st year, the ARPC is about 50% lower than it is in the 2nd year. And there's multiple things that drive that. One is you come off a promotion cycle, which is a standard promotion cycle that we have.
Another is we attach as you go. And the 3rd piece is that you actually as a business, we start to see them mature and add employees and add more charge volume. So lots of different ways to monetize. We have a very good sense of how to do it and we manage that very closely. But one
of the things when you step back
and think about this is, we expect ARPC to be up in the U. S, We expect ARPC to be up globally and we expect ARPC to be up in self employed over the next couple of years. But we expect the overall mix to drive the overall QBO ARPC down. And that's okay, because what we're really managing is the overall revenue growth of the business and what we're doing is winning in more and more customers at a lower ARPC, which will accelerate the growth of the business. So as we bring these customers in, the mix and tenure specifically has changed.
One of the questions is whether or not there's an erosion or degradation in the customer base. And this is a really important slide thinking about the full funnel of QuickBooks Online, and this is U. S. Specific. You can see we've increased traffic about 15% over the year.
Trials have remained relatively level. So these are clearly less qualified leads coming in. These are the people who've been non consumers historically. And what we've been doing is as soon as they get into the product, we're actually converting them into subscriptions at a higher rate. And the most important piece is that we watch cohorted retention and we're seeing no differences in retention.
So while we're increasing the top of the funnel and bringing people who traditionally have not tried our category, we're are seeing better conversion and we are holding level on our cohorted retention. Now what that does is the base ages and has more tenure and as people move to year 2 year 3 when they become more sticky is it reduces the overall churn of the business. And so we're starting to see that in the mid to high 70s in terms of our retention rate for the overall base, but this 30% cohorted churn rate. That only happens if you build a great product. And Brad said this, everything normalizes around having a great product.
At the end of the day, you can do things to drive near term growth, but in the long, it's about whether or not people love your product. And on the left hand side, you can see some of our net promoter scores. And we're showing this 2 ways because I think this is very important, again, because of the tenure of our base. We're showing it year over year and you can see improvements year over year of our net promoter score. And then we're showing it longitudinally.
So you can see what happens in the 1st 90 days because our product is difficult. It is a product that you have to configure and set up and there are still opportunities to improve it. But as soon as you get over that hurdle, the Net Promoter Score starts to jump. And as soon as you start to expand your relationship with us, it continues to increase. And this is where you have the real power of our ecosystem.
As you establish a base of customers who are happy over time, there are lots of opportunities to expand the relationship. And we talk about a couple of things here that drive high net promoter. One is just connecting applications. So as people start to integrate their 3rd party applications, that has an increase in Net Promoter Score. As they use our services like payments and payroll and it automatically brings the data into the QuickBooks platform, that increases to 10 points.
As you link an accountant, that increases at 15 points. So these are all things that obviously we do to stimulate our customers into these behaviors because it makes them happier as a customer and stickier over the long term. There are things that we can now see in terms of how we've instrumented our product, behaviors in the first two logins that make them happier and stickier over a lifetime. And so you can imagine how that changes our development cycle. Now there are also opportunities.
And some of the biggest reasons we see for attrition
We
understand when We understand when they're having issues with cash flow and now we're starting to proactively reach out to them and offer them financing at a time when they need it. Cash flow is the biggest reason that a small business goes out of business. The second piece is features. So I mentioned this that a lot of our customers have expectations as either desktop customers or customers coming in through an accountant that are looking for specific capabilities in QuickBooks and we haven't had them. A big one is product capabilities.
There's things like roles and permissions. There's things like job costing, there's things like job costing, progressive invoicing.
These are things that it's taken
us a while to develop on the desktop and we're catching up online. And so those are the 2 biggest factors that have been driving attrition in our base and we have an action plan against them. Now once you have a good core experience, it gives you the right to attach these services to the experience of QuickBooks Online. And attach rate is just one indicator. We use this a lot as a leading indicator.
The definition of attach
for us is
new services that we get subscribers to over the denominator of new customers over the last 3 months. And so right there, you should know that that's an incomplete picture, but a leading indicator. Are we getting better at attaching to new users? And what you see here is that in some cases, we're actually better like payments. We're better at attaching QuickBooks Online than the desktop.
In the case of Payload, we're just a little bit worse, a point worse. What's interesting to note is that we've been doing this on the desktop for about 10 years more. And so we've already caught up. You can look at the data that we have and propensity models that we're building and you can see that we're becoming more successful in how we attach services and we expect this to continue to rise online. Now it's not the complete picture though because there's other factors that will drive subscription growth of payments and payroll, specifically, whether or not someone is addressable.
So a good example of this is in our desktop products, 60% of the companies have employees. In QuickBooks Online, 40% have employees. Now we already have roughly the same attach rate, which means we're doing a much better job of attaching to the addressable base of employers in our QuickBooks Online product. But we could do a lot better job of attracting more mature businesses into QuickBooks Online. And that's again part of the challenge of having the right feature set.
So if you have inventory capabilities, you typically have more employees in a business. And so that's a big opportunity. Retention is a big opportunity. There are many customers who come in and we don't do as good of a job as we could maintaining them as customers. Some of them have feature requests on payroll and payments.
Some of them have challenges with pricing as they do more volume. And so we're getting more specific in how we're addressing the needs of service customers from a retention standpoint. Penetration, so we talk about attach rates in the context of new users, But the reality is we have an existing base as well and vintage customers, customers who have been
on our product for a
while, they also hire people. They also decide to accept credit card payments. And so we're starting to address that more. And then there's mix. And mix is, as we start to build these services for our customers, we have the ability to offer higher value customers, higher value services.
And we've had DIY payroll in QuickBooks Online. Last year, we just introduced full service payroll into the QuickBooks Online base, so you can improve mix. And so all of those are factors. In fact, probably the best way to think about QBO is combining all of those and thinking more about ARPC than it is about attach, because attach can give you false short term positive read or negative read that is not accretive in the long term. And so you're going to hear us talking more and more in the next coming year about ARPC.
So all of that's numbers, but at the end of the day, we have customers and we have to create a great experience. And so it's about what we're doing for these customers. And if you think about, our ecosystem, it has not just small businesses, but it has accountants, it has developers and different types of small businesses. And we had a lot of rollouts this year. So we deployed QuickBooks Online for accountants.
And what this does is it's almost like a client management solution for accounts to manage their practice. It does things like advanced reporting, wholesale billing, so they can build their practice around it. And we've also done a better job of integrating the Find a ProAdvisor. So now we're trying developers, and we have a completely reimagined developer experience where we've created a clear API, a better way for developers to access our customers, which is an app store, and we're seeing increased volume, so 100 of millions of API calls weekly by these apps. We've also integrated one of our acquisitions, which was a company called It Does It and created a capability that's really point and click integration with applications.
We call it App Connect. And so developers are now able to integrate their application sometimes in a matter of a day, which is a big improvement and you can see it in terms of the growth in apps that have built off our platform. For the small businesses, we've done hundreds of feature releases, some of them quite big like multi currency and sales form customization, some of them all new platforms. So now we have a Windows and a Mac connected application that works faster and has different capabilities like keystroke shortcuts, so the power users love them. And these are different ways that our customers can access a single cloud.
And then the big ones have obviously been the new product rollouts like QuickBooks Online Self Employed and Full Service Payroll for QuickBooks Online. So lots of big changes here. So we look at this as trying to fuel small business success. That's our mission from a small business perspective. And one of the things we say is, if we do that, we all thrive.
And it's not just Intuit, but our partners thrive as well. And so let's look at some of these partner numbers. On the 3rd party developer side, we've seen app connections grow much faster than the base. We're at a point at the end of last year where we're seeing about 12%, 13% of our customers have attached an application. We have over 1,000 apps that have been created on our platform.
And so developers are starting to look at us as a really meaningful channel as a way to reach their customers. On the accountant side, we've seen the same type of growth. So you're looking at the number of account linked QBO accounts. So almost 400,000 QBO customers have linked to their account, which is low in my mind, but it's a double over last year. We also have about 200,000 accounts who are using QuickBooks Online for accounts and have at least 1 QBO customer.
We also have 50,000 accountants that have used QBOA and have at least 3 QBO customers. And the good news about all three of those dimensions is they're up about 100% year over year. And that should be a leading indicator of adoption by accounts who are the biggest influencer of the purchase of the platform. And so we're starting to see some good leading indicators. In FY 'sixteen, we have some pretty significant launches that should add to that acceleration.
This is both new features, new offerings and new countries. The new features, Pete, is quite exciting. So we've talked about it for a bit. We did an acquisition of a company called Lettuce, which had been an integrated inventory system with QuickBooks Online. It took us a little bit longer than we'd like, but we're in beta and we've already released a chunk of our inventory capabilities.
And by the end of this calendar year, we expect to be at parity with our Pro product with inventory capabilities. And that's a big accomplishment. And we also did this much more in a modern way, in a platform way, by also releasing an inventory API. And what that's allowing us to do is partner with people that will help from a channel perspective on product based businesses. So big partnerships there like Shopify and BigCommerce.
PayPal is a partner of ours as well. We have Revel point of sale. And so what you're seeing is a platform approach to building out inventory, all the inventory management in the product as well as integration with all the tools that product based businesses use. New offerings, we've talked a lot about self employed. I will say that, that product is doing extremely well in the market and only has integration with TurboTax at this point.
But one of the big things that we've learned with self employed businesses is that they are heavy users of accountants. And so we will be doing an integration with QBO Accountant and we're working with Cece's team and she's going to talk much more about this, but that's an opportunity. And the number one feature request right now in self employed is making a payments request. So we know how to do that as well and so we're working on that product integration too. The new geographies, we have Brazil and France coming online.
Payroll and payments in the U. K. And Australia, and we did an acquisition called Accreed, which was a globalized payroll platform. We're starting to deploy that into different countries. And then also, we have already introduced quietly self employed into the U.
K. Market. So it's a good example of how we've been able to bring our product quickly globally. And so we'll start to learn more and more about what's unique and what's different about these different geographies. All of that is leading us to different opportunities.
So you look at our ecosystem, in the past we've talked about 1,000,000,000,000 of dollars moving through QuickBooks and that's when you include the desktop business. But one of the things we're starting to see now is a steady growth in invoices created, vendor payments, customer names, vendor names, all of this data that's incredibly powerful and allowing us to solve different problems than we've ever been able to solve before. Brad mentioned the partnership that we're doing with OnDeck and the fund that we're putting together for small businesses. That fund is a fund where we're targeting an APR of under 13% on average. And so we're getting low cost of capital money into small businesses' hands.
And the way we can do that is twofold. 1, we can find when a small business needs cash. We can see their cash balances. We can see seasonality. But more importantly,
we can see their creditworthiness.
We can see the types of customers they interact with. We can see when they pay their bills. And the thing about this is, it's not about us. We just arm our customers with this data so that they can interact with the banks. And the banks like it, because they look at it and say, this is data that can help us make better credit decisions.
And so these are the types of problems that we want to solve and really align with us trying to small businesses be successful. Now all of this rolls up to what Brad talked about at the beginning. We're feeling good about customer growth And you can see a ramp and we expect an acceleration in paid users over the next couple of years. And we feel confident in that and that's why we raised that guidance. If you remember, we started last year out with guidance of 950,000 QBO Subs.
We ended at 1,075,000,000 and now we're bringing this estimate up again to the $2,000,000 to $2,200,000 A lot of this has to do again with the expansion of TAM and thinking about these different global markets and different customers that we haven't been able to reach. It also though should translate to revenue and there are many levers here. And if you think about a point of growth in these key drivers, the 2 that are big is really going after a non consumption and continuing to drive improvements in ARPC. Both of those will give us 5 points of durable growth every year. And we expect this business to do 10% to 15% growth over time, while maintaining margins, in fact, increasing margins slightly over the next couple of years, so that we're in the low 40s.
And so that's a lot to cover. We have a platform shift from desktop to online. It's not playing out exactly how we thought it would last year, but it's playing out in a different way in that new users are adopting online in mass. So we're seeing an acceleration overall of QuickBooks users, with really QBO powering that growth. What's good is we're also seeing ARPC hold in all the different categories.
So ARPC is advantaged online relative to desktop and it's holding and we expect it to improve. QBO Global, we expect it to improve. Self Employed, we expect it to improve. But the thing you have to remember is the mix is going to shift. So the overall ARPC will decline.
But the good news is that's offset by the number of customers that we now can reach that we've never been able to reach before. And we expect customer growth to continue at 40%. We expect revenue growth to accelerate off of the range that we've currently had, which is the 25% to 30% range in the next couple of years. And the thing that's most important is that we will see customer growth and revenue growth grow in the double digits. But more than ever, we're starting to see the customer growth exceed the revenue growth, which means this is very healthy growth versus taking it from pricing.
And so this business feels like it's getting to a place where we're starting to cross through what has been a knothole of moving from desktop to online and seeing us change the mix of our base pretty dramatically and now come out the other side. So feeling very good about the business. And with that, I want to introduce Cece.
Thank you, Dan. Good morning, everyone. So we're going to take a different approach for the professional tax update this morning and instead we're going to focus on the value of an accountant across Intuit. We see about $1,200,000,000 of Intuit's revenue is attributed to the accountant. And yet today, we estimate that we are realizing only about 25% of the potential opportunity available to us by partnering with accountants.
We combine that with the fact that our core customer, the small business, depends on accountants for their success. Those two reasons are the reason that the second priority is to win with accountants who fuel small business success. So this morning, I'm going to focus on just 3 areas: the relationship between the accountant, the small business and Intuit the problems that we plan to solve to help both of them succeed and finally the opportunity that that creates value to it and what success looks like. And of course, I will also cover the fundamentals of the ProTax business, so let's share what to expect, but most importantly, because it's the foundation for being with accountants. So let me start now with the foundation.
As we have shared with you previously, the ProTax business focuses on the roughly 500,000 accountants and practitioners across the U. S. And Canada that do about 46% of all consumer tax returns. We're also doing the majority of the small business tax returns. Really depend on each other.
And interestingly just 2 services that they provide account for 85% of their revenue and that's tax preparation and bookkeeping. And the metric that Brad mentioned earlier that is quite compelling, small businesses Inuit sits in the center of this relationship. And success of scale. In addition, we provide all of the solutions to the accountants to do tax preparation in the accounting, which makes up 85% of their revenue. So we enable the relationship between accountants and small businesses.
We enable small businesses or accountants to help small businesses succeed and we enable accountants to make the revenue. Everybody wins in this scenario. Accountants brings some really benefits back to Intuit. They bring its customers, 26,000,000 consumer tax paying customers, 40 of small business tax customers were responsible for 24% of QBO new subscribers. We improved 1st year retention rate for QVIO by 15 points.
If we increase desktop to ROI conversion by 54%, we improved our attach rate. And in addition, we have customers in our own right looking to is to help them save time, grow their practice and give a total of shareholders most to them make a difference in their clients' lives. Now I'll just share a bunch of statistics and I'd like to give a couple of real world scenarios. So we have a firm in California, which has been a long term tax customer. They started to use QBO and they started to refer QBO ecosystem products.
They were now worth 4 times what they were as just a 10x customer. We're the other family, Pennsylvania. Last year they became QBO customer and started with 4 ecosystem products. This year they added tax and in just 2 years they were twice what they were 2 years ago, priced than they were 2 years ago, they doubled their business. These things have caused us to take a different look how we look at the total addressable market for accounties.
Traditionally, what we have shown with you is $2,400,000,000 which is read up of tax software and tax attach. But as we put the yield on a total value of an accountant, it expires to over $5,000,000,000 Part of that is the service market attributable to the accountants' the 25% that I just mentioned, we believe we have to constantly focus on the challenges that are with is increased complexity, whether it's regulatory changes, tax code changes or the 2nd year of health care reform. Whenever you're in a good complexity to accountants who are tied to value because tax doesn't change, you can press their time. 2nd is growing our business. Both small businesses and accountants want to grow their business, but they either don't have the time, they don't have the competency or they don't have the raise, which is typically financial.
And the 3rd challenge is that we're facing a changing workforce. We talk about the convergence of millennials and the dealers. And for the 1st time this year, millennials passed bills and show later, but they have bills or working later, on their time and their ability to grow their practice. Fortunately, we don't need locked areas that we are focused on. And so our strategy starts by having a stable view of the account.
We plan to help us save time but ensure that everything works together across tax and accounting. They want to help them grow their business by being the service marketplace that connects accountants and small businesses. And lastly, we want to be provided with a collaboration So we will give you 3 examples of just some of the services that we're going to market for this next year. 65% of that accountants tie is spent in just 2 activities, data collection and across all the pro generated tax returns, in light of what Brad mentioned earlier, it's a 100 and 30, First is a product called Intuit Link. This is an intelligent data collaboration platform 2 sided between a candidate and a client.
ATrual AI enables us to automatically pull data in leveraging the various sources that Intuitary has access to such as payroll data and financial to the collaboration platform. The platform is intelligent. So it knows what data it has and what data is missing and it updates the reminder process to the client to get that data. The second thing we're doing is taking the data that is best in QBO, We were able to reduce cycle time, which is the number of days it takes to complete a tax return by 32% and we reduced the time it takes to do a business return by 60 minutes. If you aggregate that across on base, it's $11,000,000 in savings.
The second area, we just talked about the fact that accountants and small businesses are buttered together, but they don't know how to find each other. Accountants are not good marketers and small businesses don't know how to find an accountant and not confident in a DSO. To do that. Over 200,000 small accountants, 2.3000000Small Businesses and a global base of service economy workers. We tested this last year on a consumer front and we found that 30% of the leases were actually small businesses and their net promoter score was an MB.
So our strategy is to connect the account into the small business so that they can help our Square Business be more successful and in turn, we will help the account with our practice of 10% to 15%. And the final example I'll share is one of the things that we hear from small businesses is that I want to get more advice and guidance for my accountant. And what we know that accountants want to do is making difference in our clients' financial lives. We have access to great forms of data across that they can be a hero to give that advice to their floor for this client and make a difference. So we're all in this together, we've become the place where accountants and small businesses work, grow and collaborate.
So let us all get in our inventory tool. Let's go back to the foundation, which is the Protex business. We expect to continue to grow customers. Because of our higher retention rates, the longer they work with us, the more products they use, the higher the usage rate we see. We expect to continue to bring new services to market in the patch.
We're very confident in having mid single digit revenue growth going forward and of course continuing with high margins near 60%. But again, the value of the business is how it helps grow the ecosystem. Desktop operations increased 54%, attach rates improved 19%. And I will deliver back to the accountant, we This is the reason that we focus today on the value of account across Intuit and it's the reason that the second priority for Intuit is to win the accountants who fuel small business success. Thank you.
And with that, I will now bring it up to Sonya to Dorothy.
All right. Good morning. I'm the last thing between you all and a break. So let me get right to it. So there's 3 things I'm going to focus on today.
1 is to leave you with confidence that we will continue to grow the do it yourself category. The second is to leave you with confidence that we will continue to take share. And last but not least, to reconfirm the outlook that we talked about last year. So Intuit continues to hold the number one share position in the fastest growing market serving pros and the do it yourself market in Canada and U. S.
So we feel very good about our position and it's a growing market. When you look at that within the U. S. And you focus specifically on software, it's the fastest of the growing categories and we continue to hold the number one position with the highest net promoter. And it's a category that's growing.
The do it category has grown in share and the category has expanded by 4 points in the last several years, most of which have come from assisted. There's a couple of reasons for that. One is, you've got the digital natives, the next generation workforce that's growing up with devices in their hands, on their wrists, on their eyes, in their house. And in fact, the best way I can communicate to my kids sitting across from me is through text. So that's the area that these kids are growing up in.
And ultimately, that's a big tailwind for the category. The second is the massive shift that's already happened to the cloud and mobile. And those that win in those categories will ultimately take share. Now make no mistake about it, these are trends that we've been leading, but those are the tailwinds that we're enjoying in the category. Now if you take IRS reported data, you take what we report and you take what our competitors report and you extrapolate that over the next 3 years, what you can expect is the category will continue to grow.
And in an expanding category, we've been taking share. In fact, we've taken over 2.5 points of share and if it weren't for the decision that I made on desktop last year that inflicted pain on our customers, we would be up 3.5 points of share. We will work hard to earn our trust back and they'll get those customers back, but we feel very good about the trajectory that we're on, which really shows up in the net promoter gains that we continue to enjoy. Now if you look ahead, there's several trends and I'm just going to focus on the implications for Intuit because Brad already covered most of these trends. One is mobile has already won.
So the implications for us is how we continue to innovate on mobile. The second is how we continue to leverage data to tailor and personalize experiences for consumers so they never have to do any work. The third is the self employed market. And when you think 3 to 4 years out globally, that will be the majority of the growth globally. And we have an opportunity to win in this market.
And you heard Dan talk about that. And then last but not least, we have an opportunity to really work with the IRS and industry and make the U. S. Tax system a lot safer. So those are the external market environments that inform our game plan.
And if you look internally at the customer experience, you can see that we have almost 90,000,000 folks that either come to turbotax.com, to our landing pages, to news articles and you can see that we have dramatically improved conversion across the funnel and we've increased retention. But the flip side of that is the opportunity is still massive for us. And with that, let me talk about what we're going to do to continue to win. But if I could, let me just remind you of just a couple of customer realities. And Brad talked about these, but they're worth reminding you of.
The first one is if you go outside of our 4 walls and you go into the community, 7 out of 10 consumers both in the U. S. And Canada can't make ends meet. In fact, the way they make ends meet in every single week is to extend it on their credit card, take a payday loan out, they struggle to make ends meet. And that's continued to get worse and worse.
So money matters and it matters a lot. The second is, when it comes to taxes, consumers don't think about doing their taxes till they have to. And in fact, they're met with fear, uncertainty and doubt, driven by, 1, can I get it done right? Can I be safe so the IRS doesn't audit me? And the second is, the refund is the largest paycheck of the year and it's very serious money for most consumers because it's ultimately how they get to pay some of the loans, some of the bills, put food on the table, pay the bills for some of the ailing grandparents.
It's very serious and it's very high stakes. And that's ultimately why we declared a vision a couple of years ago to make tax prep obsolete. You never have to worry about getting your taxes done. And that sits on 3 strategic pillars that we've been focused on. The first one is taxes are done.
It's done for you leveraging data and the technology underneath that delivers a personalized experience and it's done for you. The second is to innovate to put more money in consumers pockets beyond the refund. Our dream is ultimately for Intuit to be the place where you can cash in the largest paycheck of the year. And we believe these trends won't change 10 years from now. We have a lot of confidence in the direction that we've set because 10 years from now consumers aren't going to love doing taxes and they're not going to want less money.
And so our focus to get to a place where taxes are done and we put more money in your pocket is the ultimate benefit that consumers care about And it's what we come to work every day to do. And the third one, the words that we've coined inside out around unleash the network, but it's really all about leveraging data with our customers' permission to innovate and deliver new products and services that go beyond taxes. And Brad talked to you about one of those examples that had to do with lending. As we innovate more in this area and we have several material examples to show you, we'll bring it to you. But for now, I'm going to focus on just taxes and money.
Now, as a reminder, there's 4 levers that are unchanged that drive growth in this business. It's ILS growth, it's category growth, it's share growth and then ultimately revenue per return. So let me just share with you some proof points that should give you confidence that we will continue to grow the category and continue to take share. The first one is the fundamental change we made in our go to market campaigns and how we talk to customers, which is taxes are really about a story of your life. You know you better than anyone else, we will do the rest for you.
And we believe that has significantly contributed to growing the category in the last couple of years. We also believe the opportunity is huge because the do it yourself category is only 39% of the total returns in the U. S. Market. The second is the online campaign we focused on for simple filers.
These are folks that make less than $100,000 that have a very simple life, that have standardized deductions and we believe that the ultimate thing that they should care about is getting their taxes done for nothing, so they can focus on their life and money. And this contributed to growing the category. In fact, our free SKU grew 150% last year. And we believe the opportunity ahead of us is still huge because 50% of the simple filers ultimately pay way too much money to get their taxes done right. And although we have made a lot of progress in the last several years, we believe the upside is still ahead of us.
And we've been able to monetize these customers by delivering benefits at a time that matters most in the experience. And that along with other decisions that we were able to make, we actually increased dollar per return by $2 in the last year. And we still believe the biggest opportunities yet ahead of us by leveraging data to know exactly the benefits that are relevant to you at the right time and the experience. And monetization is not anything you need to Intuit. For the last 10 plus years, you can see here these trends that we know how to monetize, TurboTax knows, QuickBooks knows, ProTax knows, we all know how to monetize, which is why our focus that that has led us to is about growing the categories that we're in and taking share.
The second is we have taken share in the last couple of years and with awesome online products. The reason we've taken share is our products have soul, they have personality, they are beautiful and they convince you that yes, you can in fact do it yourself. But it is in fact what you can't see that cannot be copied by competitors. It is the work that we are doing that sits on the shoulders of thousands of engineers that are in TurboTax and Tayloe's group and Laura's group that ultimately are working to get all the data that are relevant to customers and leveraging technology to deliver personalized experience that are relevant to you. And although we've increased conversion significantly in the last several years and reduced contact and increased net promoter, there's a huge opportunity ahead of us.
Because although we've increased retention, we still lose 6,000,000 customers a year. Last year, 9,000,000 people went into TurboTax and never finished. So although we are proud of our progress, we are yet to get to the goal that we set, which is we delight every customer that engages with us. And of course, on mobile, which is where the game is, we were the 1st in the industry last year where you can start and finish on any device. You can start on the Android.
You can go to the web, it will pick up exactly where you left off. You can go back to your Android, it will pick up exactly where you left off. Our app downloads grew by 65%. Our conversion triples, but the opportunity is still way ahead of us because the conversion difference between mobile app and web is still 16 points. Now our view is the future is all about the app.
One day all taxes will get done through mobile devices and our app. And it will be as simple as you take a picture of any form, whether it's a receipt, a W-two, a 1099, you don't even have to know what it is. The technology will be smart enough to read what it is and express it in the experience and your taxes will be done for you. And we've made a huge leap forward in the last year and we think the future presents a lot of upside for our customers. And then last but not least, any time you have an experience in a product, your help has got to be superior and awesome because these are folks that are sitting alone at their home, in their office and the only thing that they have to rely on is how do I get help when I need it most.
And beyond having the ability to be able to contact us, in any software you have to deliver excellence when it comes to help. And one of the things we are now able to do is based on the data and what we know about you is deliver personalized answers, not generic answers when you're in the tax product. And that drove a significant reduction in contact, but more importantly, higher resolution of the questions customers have. Secondly is in peak days, April 14 15 we've always had about 50% abandonment rates because you just have massive, massive volume. Last year for the first time, we only had 10% abandonment rate and that is because not only the people that we have to help our customers when it matters most, most importantly those that use software they want the help at their fingertips and that's what we'll be getting to do.
And to put a bow around this, ultimately what matters the most is the safety and the security of the U. S. Tax system. And what happened last year was an event that has galvanized the IRS, the states and the industry to work together in such a way where we make tax fraud uneconomical for fraudsters. And so Laurel will talk a lot more about this, but we are very comfortable and confident in the game plan that we have and this will take several years, but we feel very good about the game plan that we have as an industry and the leadership from IRS has been fantastic.
And then just to conclude our FY 2016 outlook, you can see what the sensitivities are that were assumed. But the ultimate goal is that we grow the category and we grow our customers. And then in terms of the outlook, very consistent with what we talked about last year, which is a business where you can expect between 5% to 10% growth. And if you look at our say view ratio in the last 3 years, we've gone from 4% revenue growth to 7% growth to 8% growth. So we continue to remain confident that we can deliver within this range.
So thank you and let me hand it over to Matt.
Thank you, Sasan. As he mentioned, we're going
to head to a break.
Just a couple of quick announcements. The folks that you see sitting around the side are Brad's staff and Neil Staff. So our senior financial leaders are here in addition to
the folks that are going
to be out at the product demo. So feel free to take some time, introduce yourself to get their perspective.
None of these folks are from
a Spanish speaking country, but our 3 amigos are here from Australia, Brad Patterson, who's our Country Manager there, Rich Preece from the U. K. And Jeff Cates from Canada. So to build on some of the things that Dan and Cece talked about from a global perspective, feel free to seek these folks out and get their perspective on their home markets. With that, let's be back in about 15 minutes.
We'll shoot for 10 am on the dot and we'll make some announcements so you know to come back in. But please enjoy
the product demos, have a refreshment. We'll see
you in 15 minutes. Thanks.
All right, everybody.
We're going to get going here. Sorry to interrupt the conversations, but after we get through
the second part of the program here, we'll have some
more time over lunch to chat with the leaders and check out the products. Without further ado, I'm going to bring up on this stage our General Counsel, Laura Fanell and our Chief Technology Officer, Taylor Stansbury.
Okay. So I'm Laura Fennell, Fanal, and this is Taylor Stansbury. And we are going to cover the last three of our company priorities centered around technology. Taylor is going to cover technology to accelerate growth in data driven intelligence systems. And I'm going to take industry wide security leadership and specifically focusing on the topic that Sasam was talking about, which is tax ID fraud or stolen identity fraud.
Okay. So as General Counsel, our organization has broad responsibility, including legal of course, but also governments and cybersecurity and privacy as well as the central data organization with data scientists and data engineers. And so that makes us well positioned to help Intuit and the rest of the industry lead in the fight against tax ID fraud. Now, we operate under 3 principles that guide our behavior and our decisions around this area. First of all, and 1st and foremost is protecting our customer information and data.
2nd, we strive to drive systemic approach to fighting tax ID fraud since no one entity can fight it alone. And third, of course, we look to keep delivering on a continuous basis our Austin customer experiences. So, Insurers led in the area of tax ID fraud for quite some time starting with our suspicious activity or now known as leads reporting, which essentially we pioneered for the industry and the first to do it. And this reporting provides leads to the IRS and then most recently to the states as we saw that fraud spread to the states this last tax season, providing them leads on filed tax returns that we believe are highly suspicious based on a risk scoring assessment methodology that we use. In addition to that, we've also built a multi factor authentication capability over time, initially deployed in a targeted way based on risk assessment and then more broadly deployed over this last tax season to our entire base.
We work with 3rd parties to augment our capabilities around knowledge based authentication as well as IP address validation and scoring to stop highly risky activities from suspect geographies. And then we've also worked vigilantly over time with the industry, both governments, the industry groups such as ACTR, which is the American Coalition of Taxpayers Rights, to create a policy environment around information sharing and collaboration. And as I mentioned, no one entity can fight this type of tax ID fraud alone. This is meant to galvanize the industry over time. In addition to that, we've done things like the recently held tax anti fraud symposium, which was in January, which brought us together with experts and highlighted the risk of tax ID fraud to the American tax system, and culminating, of course, with the very public call to action by Brad Smith, when we saw that the tax system was a target of the tax fraudsters in ways like never before.
And he called upon the IRS Commissioner to convene the industry together with government, all the states and other industry groups that were relevant so that we could take this problem head on. And to our great delight, the IRS commissioner actually took up this call of action and he led a group called the IRS Summit, where we all came to Washington DC to sit down and put our heads together to combat this problem.
Okay. Before we go into
it in deep dive, I really think it's important to understand the environment that we are living in and how that affects us. So as consumers, we are under massive attack for our personal information. We have breach after breach of millions and millions of records that are being stolen of deep and complex personal information about us as those fraudsters form profiles around consumers. This is really different than the short term modernization schemes that you've seen in the past like credit card stealing, which goes on, but this is an addition. And there are very many that's the world that we are living in.
And these high profile breaches across healthcare and broker accounts and even the government fueled that spike in tax refund fraud that we saw over the last tax season. So but what we're seeing not always lost is the IRS call to action with the IRS Summit has created an ongoing concerted action that has been joined by the state showing great leadership bringing all the participants together for a multi year journey for us to work together in ways to be able to combat this. This ongoing collaboration is extraordinary and it's going to alter the DNA of the tax system. But to quote the commissioner, there is no silver bullet. No one entity can fight this alone and this is going to be a multi year fight over several years.
But with the ultimate goal of actually lessening the fraudulent returns filed by fraudsters over time. And it's also a very visible fight as well as there's many stakeholders and constituents like Congress and the media and legitimate taxpayers as well as the fraudsters are watching as well. So for those of you who wonder what the summit process is, it is not a theoretical discussion group. It is actually a roll up your sleeves and get your fingernails dirty and the working groups have been formed right away and they're off to a start and they're making huge amount of progress and these groups are meeting sometimes daily to make progress. So it is real.
The first three working groups that were kicked off, first one started around authentication and that was setting baseline standards for authentication across the tax industry as well as and this one is a very important one, working on richer elements in the e file schema. And these are information that the industry can provide both to the IRS as well as to the state at the time of filing. And this gives them much more expedient use of that information earlier, which allows them to build better filters to filter out this activity and make greater progress. There's an information sharing working group, which is really important because this actually standardized the SARS reports that we filed now leads reporting across the entire industry using our reporting as the model to help shape that. And an important element added to that is this feedback that we can now get from the government and the states that was never there before, which allows us to understand the utility of the reports and can improve them.
There's a long term strategy working group, which is really focused on some big major changes across the industry. First one is the industry wide adoption of this, which is the National Institute of Standards and Technology. And this framework, as you know, is what is governing and protecting our Keep in mind that prior to this time, these battles were being Keep in mind that prior to this time, these battles were being fought in silos, okay. Industry was not sharing information and neither with the states or the IRS. This is going to set up a valid way to share threat intelligence, share tools and methodologies so that we can take that really important step of staying ahead of the fosters instead of trying to catch up to them as we've been doing.
And it's a multi year collaboration. So unfortunately, this is not going to be 1 and done over the next year. It's going to take some time. And more working groups are going to be formed to combat ancillary issues to this. Working groups have already been started off the Tax Financial Products Group, which is really centered around those products like refund cards and refund transfers.
In addition to that, a taxpayer relief group, which is focused on the victims of fraud, educating, communicating and providing relief. And also just to confirm that refunds Hatch Fraud is not a software issue alone. There is a group focused on this issue as it relates to the professional preparer community. So in addition to our cooperation across the industry and with government, it's important that we know that we are doubling down efforts in our own house. And so you will see innovation by Intuit to help protect both customers and taxpayers here at Intuit.
And our solutions need to address a very unique problem in this industry, which is infrequent visits. You only come to the tax site on a brief occasion versus along throughout the year like an online banking site. And in addition to that, these solutions have to scale like no others and that you've got hundreds of thousands of users filing their taxes at the same time. So that's where our innovation has to tackle. In products, you will see increased authentication and notification features, which were email notifications based on account activity.
In addition to that, there's going to be super user features. So opt in features around authentication or for example, soft token technology like Google Authenticator or opting into multi factor authentication at every login. An in product security center, which is allowing customers to actually manage their security settings, be able to access their account and important information around their account, like login or access information. We're also doubling down on our data science capabilities. We have some of the best data scientists in the industry and we're experimenting and iterating to make sure that our data models are helpful.
We know when to introduce friction into our products at the riskiest moments. We actually have an eye to hopefully share some of our models with industry and government, and we're looking to do some experimentation in that. We're also making ourselves faster. So automating, automating, automating around our ability to detect and investigate suspicious activity. And of course, like the rest of the industry, we are adopting the NIST framework to govern the security of our company and our customers.
So in a nutshell, this is a battle that we are getting ready for over many years. We want to see less fraudulent returns filed. It's going to take time, but Intuit is investing exactly where we need to be to help manage this site. So at that point, I'm going to turn it over to Taylor, who's going to take us through our next priority.
Thank you. So I wanted to talk about 2 areas in particular, services to accelerate growth and also data and intelligence systems. In the services space, if you were to look at our applications only a few years ago, I think I'm on the wrong slide,
there we
go, then you would have seen monoliths corresponding to each of those applications that made it difficult to share data, share workflows and to share code between the applications. And we've been on a journey these last 2 years of
a couple of years ago at
the number of services we had, it was single digit. And today, it's over 160. Those services are being rapidly adopted multiple times across our different applications with an average adoption rate of 20 times per service. So we're getting reuse benefits from those services and the ability for those capabilities to go across our apps. And this saves a tremendous amount of developer time and enables us to move faster.
So if you look at the results for 3rd party applications, because many of these services are published through to our 3rd party APIs, then a couple of years ago, we had a few dozen third party applications and today we have some 1300. And if you were to look to our internal applications development and efficiency, QuickBooks Self Employed, which actually uses services from Mint and from QuickBooks and from TurboTax, was able to get brought to market in a few months. Let me give an example to bring this to life of a couple of different services so you can see what they're like. One of these is the market acceleration platform, and Dan alluded to this. What it enables us to do is to localize products for our foreign markets much more quickly than we would otherwise have done before.
Localizing QuickBooks, as you might imagine, is a compliance problem is far more difficult than language localization or simply currency localization. And it used to be that we chewed up core developer time every time we wanted to pump out a new country version. And now with the market acceleration platform, we've quadrupled the speed with which we can actually get that done in developer hours and the developers who have to do that work are non core developers, so that mainstream development of the domestic QuickBooks product can continue apace. Another example of these is the tax knowledge engine. At the very beginning, TurboTax was a forms based application and then it moved to an interview based application where the idea was we ask you a bunch of simple questions out of which we can construct the forms.
But that means that all of our customers are going through largely the same experience at the same time. And one of the things Hassan talked about is our desire to move towards more personalization. And so what we have done with this service is actually pulled the tax logic out of forms and re rendered it into rules, which gives us tremendous amount of user experience flexibility, so that different users can see a different experience and you don't have to be bothered with questions about railroad employees or Ottoman Empire settlements if they can't possibly apply to you. So that's the tax knowledge engine. Not only does it give benefits and customer experience, but it tremendously collapses the amount of code that we have to write by about a factor of 10 to 1 and speeds up our rate of development that we can come up with new ideas and new features to take care of customers better also by a factor of about 10 to 1.
Now I'd like to spend a few minutes on data and intelligent systems. So as we spoke about earlier, we actually have a tremendous amount of very interesting data that we store on behalf of our customers. And the first thing that's important is that we think about this data as not our data, but it's our customers' data, and we are the stewards of that data. It's our job to protect that data and to use that data in ways that are accretive to our customers. And so we have a set of data principles that we've worked out that we adhere to across all of our applications that have to do with securing that data and using that data only for purposes that are accretive to our customers.
Now with that said, we have built a number of data services that to benefit our products and our customers, and I want to talk about 3 of those. The first one is the financial data platform. And what this does is it goes out and aggregates data from banks, it aggregates data from payroll services and a number of other sources so that instead of having to type in all the data you need to run our various applications, that data can simply be present. And this supports the mission of accounting is done and supports the mission of taxes are done. And as you imagine, and Brad alluded to, the idea
of never enter data.
So that is our ultimate goal. So if you imagine doing your taxes on an iPhone, you don't really want to be typing in a lot of data and having that data appear either because we're able to get it from a third party primary data source or because we're able to get it from an image or because we were able to cross up data that came from an image and from a third party financial source, that makes the job of getting your taxes done a whole lot easier.
And then what I want
to talk about is the customer profile service. And what this does, if you were to go back again a little bit in time, each of our different applications have silos of data that weren't particularly easy to move across application. And so what we've done is built a profile service customer to share customer to share sharing between applications so that data is at their fingertips and they don't have to reenter it app to app. 2nd of all, it helps us with cross sell and up sell because we know what the state of the customer is, a 360 view of them, so that we can do a better job of moving them into the kinds of attach that Dan talked about earlier. And 3rd, it really helps us with customer care because the customer care agent has one place to work instead of many tools that can do a better job of serving our customers in less time.
The 3rd of the services I'd like to talk about is the data driven Tax Expert. And the idea here is we want to help users end up with entering consistent data and having a return which is correct when they go and file it with the IRS and states. Now one could build out of these checks manually, but you can only imagine so many of them. We have some 400 or so that are in the product today. Instead, what we're moving towards is this idea that we see 60,000,000 tax returns every year.
And with Intelligent Systems, we can then look at using all of that data to do a better job of advising the customer than a tax preparer would be able to do with the amount of experience that they see in their lifetime. So the goal of this, of course, are taxes are done correctly and confidently. So putting all of this together, what I'd like to do is talk about architecture for a moment. And again, if you were to go rewind a few years, the architecture diagram that you see here would have looked more or less like a number of pillars where each corresponded to a monolithic application with undifferentiated services inside and not a lot of reuse across. And what you see here is services that span multiple applications that make it easier for us to construct and evolve those applications and to make it easier for us to build data flows and workflows that go between those applications, including all the services that I spoke about in the last few minutes.
Now all of these are to serve our various customer segments, small businesses, accountants and consumers, and it does ladder up to support the 1 in 2 in product strategy that Brad talked about at the beginning of the day, enabling those workflows and data flows to happen between our different customer constituents as they work together to simplify the businesses of their lives. So thank you very much.
Thank you.
Let me bring up Neil Owens, CFO, who will talk about our finances.
Hey, thanks, Tayloe, and thanks to all of you for coming out today and giving us your attention, listening to our story, and thanks to all of you participating online. Few minutes left before we get into your questions, and I'm going to take that time to do 3 things. First of all, just to review with you the financial principles we use in building our forecast and building our models, tell you some things that we've learned since we talked last year and give you some idea an idea of what to expect going forward. So with that, we'll dive in. Our first financial principle is to grow our revenue organically double digits or better.
We do this through customer growth, through growing our category, growing our share. We love customers. I hope you've heard that theme already this morning multiple times. And this is a key component of our financial planning principles. We've done pretty well against this principle.
And 8 out of the last 10 years, we've either beat this principle or we've never lit a point or so. So I think pretty good performance. We missed it in 2,009. We had 4% revenue growth in the worst year recession year recession that any of us could remember. And last year, we made the decision to move $400,000,000 of revenue from 2015 out into future years as we changed the way we delivered our desktop product.
So pretty good performance against this principle overall. And we feel very confident, as I hope you've heard today already, about our ability to deliver against this principle going forward in the years ahead. I think our track record is pretty good on margin and managing margin and expanding margins. We have talked about a number of ways we're investing today. We're continuing to invest heavily in products that we think customers love and will use long term.
We're building products for new markets and want to be able to do make sure we can fund the global expansion. And we want to keep the bar very high in terms of already. Our business is not capital intensive in the traditional sense. We think about 3 categories here to invest, always looking internally and the products and services that we can build and that we can provide our customers that accelerates that customer growth and grows our category and expands the markets. Brad has already mentioned and we've talked a lot about our acquisition track record.
We like acquisitions as a way to extend bringing talent and technology and to deliver on our strategic goals. Clearly, the results have been a little mixed there and that we've done 16 deals over the last couple of years. A couple of those, we paid too much. And a couple of them we found out didn't fit our strategy as we continue to refine the strategy going forward. And so we've announced that we'll sell some assets.
We've learned a lot from these processes from every transaction deal, but I'll be the first to acknowledge to you that, that education has been too expensive, and we've got some learnings there, and we have a different approach going forward that I'll talk about in a second. Finally, in terms of returning cash to shareholders, I think we've done a pretty good job there. We've returned about 110% of our cash flow since 2,009, our free cash flow to investors, either in the form of dividends or share repurchases. Our final financial principle just means that we maintain a conservative balance sheet. And to us, that means we have lots of liquidity, we keep adequate liquidity, and we always want to have ample borrowing opportunity and borrowing capacity if the case arises.
So this kind of undergirds our planning. A very legitimate question for you would be, how do you plan to accelerate this organic revenue growth? How do you intend to provide that? This is a slide Brad and Houston. I'll just return your attention to it because we think there's a huge opportunity here, and we see the total addressable market as being much bigger now than we would have talked to you about last year or in years before.
Brad shared with you some very actionable plans that we have that are already in flight and some very tangible reasons to believe that we can keep customers growing at a double digit level organically for many, many years to come. Today, we're only taking the benefit of less than 10% of this addressable market with our revenue stream. This goes back to 2012, and you can see out to 2017, online is clearly driving the growth. TurboTax and QuickBooks are the 2 light green bars at the very section at the center of these bars. And so as you would expect, that's really fueling our customer growth.
We expect to add $1,000,000,000 add $1,000,000,000 in revenue from these online activities from 2012 to the end of 20 17. So that's clearly what's fueling the growth. I love this slide though because as Dan mentioned to you earlier, we can't forget the fact that our desktop portfolios, primarily QuickBooks and TurboTax, are still quite large. And they're quite profitable, and they produce a lot of cash flow that helps fund our expansion. So we've got a strong base on here to build from.
Now I know a lot of you have questions about small business. I'm going to more detail there. So we're going to talk about that for a couple of minutes. This is our customer growth expectations. Dan covered this briefly with you earlier.
But I want to pause here for a second because as you look at our customer growth out through 2017, we're anticipating 700,000 to 800,000 additional paying customers from our base in 2015. These are people who are either QuickBooks subscribers or they purchased a desktop license in the current year. That's about 3 times the growth that we've seen since 2012, and we feel pretty confident in these growth categories. The light green in the middle is QuickBooks Online in the U. S.
And many of you have questions about the mix of this growth and how much of it is outside the U. S. With a lower ASP, how much of it is self employed. A critical part to understand our revenue guidance here is to see how much of this growth in QBO is in the U. S.
Where ARPC is high, and as Dan has already mentioned, we expect it to increase. Big desktop base here, too, that's probably going to stick around longer maybe than you thought and maybe than we thought last year. Speaking of last year, the last 2 years, I've shared this slide with you, which is an attempt to estimate the 5 year revenue of a new customer. And this is a pretty effective way of looking at the balance between desktop and QuickBooks Online for someone who's joining the franchise adopting our accounting software for the first time. It was also a giveaway last year to demonstrate the impact we made in rebalancing the value proposition between QuickBooks Online and QuickBooks Desktop.
So we've talked about this for the last couple of years. It's not the best way, though, and it's not the way that we manage and measure our revenue performance inside the company. Revenue per customer and our overall revenue goals in small business are really the key way that we drive that with customer growth first, thinking about the sources of customers and where they come from and also the revenue produced. As you've seen, our target for our small business revenue for 2016 is about 7% to 9% growth this year and 10% to 15% growth in revenue longer term. That's really the way we manage that.
We use some of this data for lifetime value to customer acquisition cost data and things like that, but it's really not the most indicative and not the best indicator of how you can expect the business to perform longer term. To deliver that revenue guidance I talked about for 'sixteen and beyond that, we need our online revenue to grow 25% to 30%. And this slide just breaks down the average revenue per customer as well as our growth expectations for the category going forward. This is revenue per customer for 20 15, and you can see the average of $370,000,000 It gives you the detail here by online in the U. S, online outside the U.
S. And self employed. You can see some levers we have at the right that we're working aggressively to improve monetization and average revenue per customer once we get the customer in. But a critical thing to understand here is that the mix of these customers and the revenue per customer is an important component driving our revenue guidance going forward, and this is actually the mix that we have built into 2016 and 2017. So you can kind of understand what you what we expect to be the biggest driver.
Dan mentioned previously that we do expect and we have plans to grow average revenue per customer in each one of these individual categories. But if the mix performs the way we expect, this average 3.70 at total customers will go down over time, and that will be a great thing because that will mean we're bringing in more customers outside the U. S. And more customers who are totally new to accounting software in the form of self employed. So this kind of tells you the mix that we expect and the different revenue per customer for QuickBooks Online.
Let me give you a little more detail of why we're so confident in this type of revenue increase going forward. About half of our QBO portfolio today has been with us less than a year. That's not because of any new promotional techniques or campaigns or anything like that. It is a reflection of the significant growth we've had in QBO, both in the U. S.
And outside. And we know that as these customers come off promotional pricing, the average revenue per customer of just the software component goes up by about 50%. Promotional periods and offers vary, so this is on an average basis. But we've watched this and we've tested it extensively, and it's pretty clear that we can see this 50% increase as someone comes off and exits the promotional period. And we know we look at cohorts and we know the retention rate of these new customers is about 70% versus mid-70s for the overall portfolio.
So customers are coming in and it's very predictable. We can feel pretty confident that the average revenue per customer, once these promotional periods expire, is going to be quite good and retention is going to be high. So that gives us some confidence as we model out our average revenue per customer and our total revenue guide for the small business group going forward, okay? This is also a slide Brad used. I want to use it now to transition away from small business back to the total company.
We're kind of midway through a significant transition in our business model. We got another year, year and a half or so to go. But we're seeing great results in driving customer growth with our online product. That's where all the customers are coming in, both in tax and in small business. We're seeing a nice shift to connected services revenue and revenue that's coming from these connected products and is also driving great customer growth outside the U.
S. So these are big areas for us to invest and see opportunities materialize as we go forward. Strategy and lease learnings are driving our capital allocation process going forward. I can assure you that we want to make sure that we are investing adequately to have the products customers need to, 1st of all, come into the franchise to adopt and use and also to stick around and have ways to attach and add additional services and features. So we
make sure
that we're providing adequately, and we're very disciplined in making sure that we're investing talked about divestitures a little bit. I talked about divestitures a little bit. Strategy tells you what to do. It also tells you what not to do. And we've decided this past year to sell some assets that didn't fit as tightly with the refined tighter strategy as we anticipated.
We're also making some decisions and actually they're already in flight with our general operating costs just to be sure that we're allocating and spending all of our general operating dollars against things that are going to move the needle in the strategic priorities that Brad has already aligned. So there's a lot of internal focus to be sure in this first category of allocation that we're investing wisely and in accordance with the strategy with the dollars we spend internally. We'll continue to look for acquisitions that accelerate our strategic road map. But as I mentioned, the bar is much higher now in terms of strategic fit. I would tell you we're much more conservative in terms of our valuation of those acquisitions as they come in and in the plans that we develop and put in place going forward so that we're not putting too much pressure on ourselves or on the acquisition to perform in the early years where it's really difficult to do that.
So still very much in the market, still Verdig's looking for acquisition opportunities, but with a tightened approach. In terms of returns to shareholders, as I mentioned, I think our record there is pretty good. Since we instituted a dividend back in 2012, we've doubled the dividend since then, and we've returned a little over $6,000,000,000 in free cash flow to shareholders since 2,009, about 110% of our free cash flow. We like these tools for capital allocation. We continue to use them, as we mentioned on the call a couple of weeks ago.
We're still aggressively in the market and like the dividend and the opportunities that's given us. You've seen our guidance already, so I'm not going to belabor this. I would just tell you 8% to 10% total revenue guidance at the total company level. If you look at the midpoint of the range, this gets our margins back into the 32% level, so about 500 basis points better than last year and well on our way to getting back into the mid-30s that we've talked about. So we're confident that we're on track to do that.
If you look at the guidance by segment, by business unit, I just might mention here that the consumer ecosystem in this chart really consists of net, net bills and a financial system data aggregation business we have called OFX. The mission of this group is really to improve bill payment and bill presentment for customers and to automate the connection between our small business customers and their consumers. So that's why we're putting it we're lumping it in with the small business group, and we'll be reporting it in this segment going forward. But I will tell you, the next couple of years are really an opportunity to build out and to test this 2 sided network and to truly try to improve the relationship that our small business customers have with their individual consumers and to ease the bill payment process for them. The other thing I would point out here is that I've talked about throughout 2015 about $150,000,000 of revenue in the pro tax segment that got pushed out due to our ratable transition.
You'll see it showing up here and that affects the percentage increases for 2016 as that $150,000,000 of revenue is back in the plan for 2016 as it comes in. Couple of thoughts here about growth drivers. If you're going to look for revenue growth of 10% to 15% small business over the long term, really where do we expect that to come from? Should be no surprise to you after all the conversation this morning, the biggest single driver there is growing the category, getting new customers who to adopt and use accounting software who haven't used it before. That's why we're so excited and we talk about the percentage of our QBO customers every quarter who are new to the franchise because we feel like it's really exercising and giving us an opportunity to use this biggest lever for revenue growth over a longer period of time.
We've grown this contribution by them coming through the promotional pricing process I talked about earlier, but then migrating to more full featured SKUs over time and attaching things like payroll and payments. So the opportunity to monetize these customers over time is tremendous, and we've seen that before. And that leads to the 2nd biggest lever down here of increasing ARPC of customers that we already have. We're going to be careful not to use price arbitrarily to drive revenue growth. We want to do that when it's combined with the customer getting more value for the services.
I'll talk to you more about in a second. But those are the 2 biggest levers that deliver that 10% to 15% revenue growth target we see longer term in small business. Something in consumer tax, Assan did a really nice job of talking about the opportunity here to continue growing our do it yourself tax category and to take share within area. That is by far the biggest way that we deliver revenue growth and consumer tax. That's why we have all the focus and energy around that, and that's how you get to the 5% to 10% range that we talked about.
Just to remind you on small business, we are targeting margins there, operating margins in the low 40s, 60% margins really in both of our tax businesses, quite profitable franchises there. In pro tax, the category our share is pretty stable. I think CEC did a really nice job of explaining to you some opportunities we have there to increase revenue per customer with some additional services and offerings and things like that. But by far, the biggest strategic opportunity in our professional tax group is linking these accountants to small businesses and everybody wins in a situation like that. You saw all the stats that C.
C. Shared about how much better the small business experience is when they have an accountant. They're much more likely to be successful and they're much more likely the accountant is much more likely to recommend QuickBooks and automated accounting solutions for them. So that's really the strategic driver behind our pro tax business. Now this is a page I've been eager to talk to you about since August 20.
About this time last year, I shared some long term growth drivers with you for 2017. We thought they'd be helpful to understand the transition we're going through with ratable. Since that time, we decided to divest some assets. We learned some things with our business process through the last 12 months. And one of those things we learned was some of the assumptions we used in building those models were just way too aggressive.
So we had to back off of some of those for a number of reasons. But I was way too vague in my comments on August 20, and I kind of took some things away without giving you what to go to. And so that's a frustration, that's a miss on me. And so I've been eager ever since then to get to today and to clear some of that up. I said a number of times on the call on August 20, we'll talk about that more at Investor Day.
This has been the longest 3 or 4 weeks of my life since then. So I'm happy today. We gave you some clarity this morning on QBO subs. We took the guide for 2017 to $2,000,000 to $2,200,000 built into our plan. What's reflected there is a lot of that incremental growth would probably be outside the U.
S. Or in self employed. So the revenue impact is not as large. But we're feeling good about that number and about an opportunity to grow QBO subs overall. We gave you better expectations around that.
Brad covered some of the components when we changed our revenue outlook for 2017. We kind of walked you through some of those issues there, and so I won't recoup those. But I do want to talk to you about non GAAP earnings per share. And so I said on the call, we can still see a path to $5 and people have asked ever since then, what does that mean? What are you talking about there?
And so I want to break that down and give you a little more clarity around it. In the release we put out today, we showed a new range of $4 to $4.50 a share in non GAAP EPS for 2017. That's a pretty broad range. It's still 2 years out. But here are some of the things that go into our thinking.
The items on the left are things that would cause our non GAAP EPS in 'seventeen to be even bigger than $4.50 or certainly drive it to the top end of that range or beyond. Things like much more aggressive growth than we have built into our plan today. A mix change there that drove more of those customers into U. S. Than we have today, than we have in our plan today, would certainly put us at the top end of that range or maybe over.
We have some ARPC opportunities. I've talked about those, so has Dan and so has others. We have a point of view built into our plans about how successful we're going to be there and how well those work. We're going to drive those aggressively, but you need to know that many of those are in markets outside the U. S.
And it's still early to understand and to know definitively how effective we're going to be at attaching those customers and having them coming out. But that's the second biggest thing that will push us to the high end of the range. When we talked about this back in August, we have a plan for what we're going to do in terms of share repurchase for 2016 and 20 16. It's safe for you to assume that we didn't assume a share price we are today. So that same amount of money is going to buy a lot more shares.
We'll see how that plays out over the next couple of years, but that's also a driver. It's also a lever that causes EPS maybe to be at the top end of the range. If you move to the right hand side of the page, these are things that we have built into the plan. We have investments and investment levels built into the plan today to fund global expansion, product improvement, especially around security and privacy. We have feature and functionality improvements built into the plan today.
If we see opportunities to go faster on that, if it's in the long term health of the franchise, we're going to do that. We want to do that. We don't want to be locked into making short term decisions that are not in the best interest of the company long term just to meet a target. So that will put us at the low end of the range. Hopefully, that gives you some clarity and some way that we're thinking about it.
I realize it's still a broad range. I would have to tell you for us to be at the $450,000,000 plus today, everything on the left would have to pretty well go right and be at the optimistic end of our expectations. I think the probability we will be at the low end of the range though is pretty remote as well. So my high percentage guess today would be somewhere around $4.30 a share to balance out work we want to do with growing the company and growing the franchise as well as generating sufficient cash and profitability in line with our financial principles. So that's kind of how we think about this.
I hope that's helpful. We learned a lesson about not giving long term predictions if you're a CFO, a football coach or even a gentleman farmer. So we'll see how that plays out going forward. I appreciate you listening to our story today. That's our pitch.
And the thing that strikes me about Intuit is I think it's such a unique blend of a high growth SaaS business in a couple of franchises that are very large, very profitable and enjoy really nice share and category share there. So I feel really good about that. We're very confident, I hope you pick that up, about our opportunity to grow customers, expand margin and EPS going forward in 'sixteen through 'eighteen. We do capital allocation with shareholders in mind, and I'm really pleased with the record we have there with our capital allocation. And we're forecasting, expecting return on invested capital north of 25% as we look forward in 2016.
So that's our story. And Brad's going to come up now and answer your questions and be the moderator for this next session. Brad?
All right. So I want to close-up before the hands go up. I can see the anxiety in the room. Everyone is very interested. Just a couple of closing thoughts to put a bow around this morning if I could.
First, I want to start with one of my favorite quotes. You always get Uncle Brad story time up here. Winston Churchill's definition of success. Success is the ability to go from failure to failure without the of enthusiasm. Well, at Intuit, I might replace failure with mistakes or you may actually have failures in case of some things that don't work out the way you thought and experiments you ran.
But the one thing I hope you see in this company is that we're willing to stand up in front of you and say here's what's working well, here's what's not, here's the mistakes that I own and you heard 3 or 4 of us all claim the same mistake, which was it was my fault that I didn't bridge the gap in the earnings call of what we said last year and this year. That's because we all collectively feel that and the fish thinks at the head with me. But there is no loss of enthusiasm and that's because that enthusiasm for us is rooted in confidence, which takes me to one of our second favorite quotes. John F. Kennedy once said, the best time to repair the roof is when the sun is shining.
This company over the last number of years that Neil walked through has delivered 8 out of 10 years of that double digit organic revenue growth. And in fiscal year 'twelve, we began from a position of strength to restructure ourselves for the next chapter, to become a product and platform company. And we did that knowing that it was going to cause a lot of angst internally and a lot of challenges of trying to tell our message externally, but we took it on. And we're sitting here today with a mission that's not changed after 32 years. We have a strategy that is still the same strategy, but what underpins it is how we're going to deliver on that strategy and that's what we've tried to unpack for you today.
We are now a product and platform company that will deliver awesome experiences in a mobile world. We now have the ability to solve 2 sided problems in a way we could have never done before and data is our source of durable advantage. Not only will we protect it and keep it secure, but we're moving the paradigm from never enter data twice to never enter data at all and that is not easily matched. Which takes me to the last piece, the confidence is rooted in something we call say do ratio. Saying something is one thing, doing it is something else.
And so whether it's the financial principles and our ability to execute year in and year out or the fact that when we unpack our total address to market opportunity, we don't base it upon just imagine a 1% penetration on what that could be. It's actually rooted in the fact that we can tell you today, 8 out of 10 customers coming into the QBO franchise are new to the franchise and new to the category. And you can compare that to others going through similar business model transitions in the industry and they can claim 2 out of 3 I mean, 2 out of 10 and 3 out of 10, very few have 8 out of 10. They're actually bringing in their category growth at that level and that's why we have the confidence we do. So I own the mistakes, the team owns the successes, but we collectively own the future and we're very fired up about the opportunity.
So with that, I'm going to open it up to you to hear what's on your mind. Okay. So Eddie, you take the mic to whomever and then I'm going to whoever has the mic gets to talk please. Thank you, because the lights are blinding me and I can't see who's got the hands up.
Hi Brad. Brent Thill with UBS.
Today's biggest surprise was the $4 floor on the earnings. And when you look at the $700,000,000 roughly that you cut $350,000,000 from the divestitures, I would assume those are lower margin solutions from your core margin at the company. So there's been a lot of questions and follow-up around what gets you to that low end. I know Neil mentioned a few of the dynamics, but it certainly think there's a lot of questions that investors want to hear more around. What got you to 4 on that range?
Yes, happy to do that. I think first of all, there may be a mis to make decisions in the franchise that we don't think are the right strategic decisions today and so it's in the zip code. With that being said, that drop from 5 to 4 was really driven by 3 things, the $350,000,000 in divested assets and I'll unpack that in a second, the $100,000,000 in the non strategic channels and check was shut down and then $200,000,000 in assumptions we had around price increase, which by the way flows straight through to the bottom of one of our most profitable businesses called Pro Tax, as well as some attach rate assumptions, which after you've got the customer acquired, that all flowed through as well. So there were some assumptions in there that were more higher margin assumptions. Now to unpack the 3 we divested, 1, Demandforce is a really good business.
It's growing very fast. It just happens to be
a further upmarket, a more vertical business and doesn't really play with the QuickBooks base
the way we had thought, and we're going to find a better home. That business was truly on a get to cash flow positive trajectory. The second is QuickBase. We bought $19.99 for $20,000,000 That business has been growing many 25%, 30% plus is producing profit and serves 75 of the top 100 Fortune 100 companies. And it's a land and expand strategy.
We sell that application to enterprise companies within inside Salesforce. So it has profit. And then 3rd is a 32 year old product that is very high margin called Quicken. And so it was a 2% of the company's revenue, but that customer that revenue flowed through to the bottom line. So we have divested good businesses that actually were profitable or on the path to profitability, but they didn't fit strategically and we felt instead of starving them, we would give them better homes.
The second, the $100,000,000 in the check, we had some good stuff there. And the third was that was high margin assumptions when we backed off the assumptions. So that's how you get to the math that says, it's not we sold no revenue, I mean, no profit businesses, no I can't get the math. That really does impact the differences and I hope that helps. Okay, thank you.
Hey, Brad. It's Ross MacMillan from RBC. I have two questions on and maybe Dan can chime in on the small business side. One is, I'm still not clear on why the unit repurchasing cycle of the desktop base is elongating if they're not moving to QBO, Because I thought they were always on this kind of cadence for 3 years or so. So maybe you could talk to that.
And I'm just curious, it's a very bullish thing to say that 80% plus of QBO customers are net new to the franchise. We went back 2 years before Harmony was introduced and we thought about the desktop base, how many of the new desktop customers would have been net new to Intuit each year?
Okay. Let me try to take those and I want to ask Dan to add color commentary if I can. So on this first one, you're correct. We still have a 3 year license agreement we sell with a desktop sale at Staples or at Best Buy or some of the other stores out there. What's happened though is the upgrade cycle used to be in the neighborhood of 2.1 years.
You had a group of people that upgraded every year, many times driven by accountants who said, I want you on the newest version because I'm on the newest version. You had others who would say, hey, you know what, I've now made a decision in my business and I want to get this newer version and so they buy it. And then you some that ride it out until what we end up doing, sending an email and a direct mail piece that says, look, if you don't upgrade by the end of the 3rd year, you no longer get technical support and your payroll and payments won't work. And so those are what we call the discontinuation group. What's happening is, as we start to shift more to cloud and accountants get more comfortable with the cloud and small businesses do too, that 2.1, Dan said moved 3 or 4 months roughly, it's moving into more of the 2 and half range roughly.
And so it's not that they moved beyond 3, it's just that the accountants are now leaning into the cloud, so that pressure to stay every single year is kind of getting backed off. And you have others saying, hey, I've got a choice now, desktop or cloud. I may go desktop and then it's that disco group that's kind of the last tranche and that's the group that's kind of moving it out on average. Anything you'd add to that Dan before I take the second?
Yes. The other thing I'd add is, if you think about our strategy with the desktop and in relation to online, a lot of the features, a lot of the work we're doing to address new users is really in QuickBooks Online. A lot of what we're doing in the desktop is growing with our base and focus on the experience for high value users. So it's for us, we look at it and say, it's okay if their
repurchase cycle is lengthening so long as they're staying with
us and they're enterprise base of our customers. That's a place where as they're growing up, they're actually now spending roughly $3,000 a year as a subscription and that's where we also see our highest value payroll and payments customers and you can see our development moving in that direction as well. So we do a lot of features for the desktop are batch capabilities for high volume small businesses or things tied to the services themselves or things that drive value for a subscription to move someone to enterprise.
Great, great add. Russ, let me take the second one on. You asked a few years ago before Harmony what would be the average QuickBooks mix of new customers new to the franchise and those. We used to sell on average in desktop about 1,500,000 units a year. 2 thirds of those would be upgraders, walking through exactly what we just walked you through with the people who did it every year and the people who waited for DISCO.
And then a third of those were new customers. And we typically got new customers from Excel Spreadsheets, shoeboxes and others. So those were sort of new customers coming in. One of the things that's happened as a result of Harmony in the cloud is, so call that 500,000 of the 1,500,000 are sort of new. Cloud deployment in the cloud, we've got little people now choosing the cloud.
So that desktop number I referenced on the earnings call is now about 300,000 customers are coming in. But Dan shared, we added 100,000 new QBO subscribers in the last 90 days. If you just said that over 4 quarters, you're looking at a big, big number. That's why our total paid customer growth is actually our total paid customers is growing. So we still have 300,000 roughly that are coming in, they're sort of new to the franchise in desktop.
And then you've got a much larger number coming in QBO and it's $100,000 a quarter in the last quarter. And so those two numbers are what's growing the category. Okay. Great. Thanks, Anna.
Hi.
Paul Till Pritchard right down here from Citi.
Hi, hi. Two questions also.
I think the second one is going to be for Neil though. On you gave us the revenue per customer. I think in a lot of these businesses we're sort of being trained to think about customer lifetime value and the CAC associated with that is the plug. Can you help us understand, it's probably early in these segments, but profitability and sort of profit to you or marginal profitability on those various segments, how do you think about those 3 playing out long term?
In the 3 segments for
QBO, U. S, international and self employed.
Okay. I will take that and I'm going to have Neil to jump in. 1st, it starts at the aggregate number. What Dan stood up and shared is that we see this business growing subs 40% plus. Revenue for the QBO ecosystem 25% to 30% and we think we can take that even higher and all that plus the desktop business, we think the small business group margins will be 40 plus percent and that's actually improving margin.
You may say, well, how are you improving margin while you're leaning into customers? Well, Tayo explained, for example, we're now starting to use services across multiple products. We're taking 10,000,000 lines of code down to 1,000,000. We get a lot of efficiencies as we make this transition. Now to unpack it for you, we're at the early stages of all this business of scaling.
So one of the things we and all other SaaS companies do is we look at lifetime for QBO US and total QuickBooks that's north of for QBO US and total QuickBooks that's north of 5. In fact, the number is it 5? Well over 5. For the non US businesses, we have a target for ourselves as we want that to be north of 3 because we want to continue to lean in. And so we're always going constantly be having a new opportunity to build a brand in a market we weren't known for and then over time monetize that.
And those are the 2 moving indicators we have today. So, we don't have the same assumption for profitability. But keep in mind, when we hit the total key, it is total customer base, desktop and online growing, with the QBO subs being the fuel north of 40%. Total revenue growing double digits in the small business group, 10% to 15% over the long term, but it's the QBO ecosystem growing 25% to 30% that's fueling that and total margins are 40% plus. The leading indicators will be LTV to cap and that's what's going to produce those numbers.
And then just the second question I had, I think probably for Neil. Everyone's trying to
get these questions there and I can take it. I'll take it. No, I'm going to send it to Neil.
So I think Dan alluded to maybe attach is not the right metric to look at. And I don't know if you're going to report it going forward or not. Could you just help us understand, we use attach pretty key in our model to try to get the answer to all this stuff. So is it going to be attach still as reported? Or is it going to be a new metric to help us understand the monetization per sub or the value per sub?
Can we partner on this one?
Go ahead.
Let me tell you what we've learned. We attempt as we're making this business model transition to try to come up with what's the best leading indicator that lets you see and understand why we have the confidence we do. And so we use these attach rates and particularly for new users, as Dan said, in the last 90 days because they are a proxy for how many people are coming in and finding the product elegant and then buying additional services. The challenge is it can leave you confused. And so I don't think I've been in an investor meeting or an earnings call where someone doesn't end up saying, well, what's the total potential?
What could payroll look like when it's all the way there? And that's where you have to start with the total QuickBooks desktop base, only 60% of those businesses have employees. So that's the total addressable market today. And then what's our penetration into that. QBO, only 40% of those customers today have employees and what's our penetration into that?
If we didn't start talking penetration, you would hear, hey, I see 23% in QBO or if you look the most recent data that Dan shared, it's 26% if you back out the self employed group who by definition don't have employees. And you say, well, that's next to desktop and you could start to draw some conclusions from that, that honestly aren't accurate. So we will at this point, we're not pulling the rug out from under anybody on attach rates. As long as we can everyone understand that it is a leading indicator and we want to start to talk more about penetration into the base of customers who actually need that service. That's really the question.
We always end up getting to the follow-up anyhow. Great, that's the attach rate. What will success look like and how many of those customers can you get? And we think it's a complement of both that will help. Neil, would you add anything or Dan?
The only thing I'd add is ARPC really does incorporate all of this. It's penetration plus the mix of what we're selling into the base of customers. And so there might be times where attach rates go down a little bit, but we're actually doing price realization on something like full service payroll and that could be good. And it's sort of the total key. But to Brad's point, the leading indicator is when a new customer comes in, are we better at selling a product to them than the last customer that was there last quarter?
And so both are really important. I just
I think you want one to be sort of framed in the right way. I'd say it's going to help
you predict and the other, which is the total
attach rate is important?
It is because you get an ARPC and you don't know what's driving it. I mean, we get commentary on ARPC, but you don't I think that's the framework today that we have to get to an ARPC.
Okay. Well, let's take that as an input. I mean, one of the things hopefully you saw today, in fact, I spoke to some of you during the break, as I said, how's it going? They said lots of information. It will take me 3 days to digest it.
We're not afraid of sharing data. We're going to make sure it's the most helpful information for you so you can see what we're seeing. So that will be the key.
Brad, Scott Schneeberger.
Two questions as well. I'll start out with a conceptual one for you, maybe Neil getting involved. Just curious with a
lot of that, with a little communication
on the longer term outlook confusion back on August 20, if you could take us back to the prior year, to the prior fiscal year end when you were setting up the fiscal 2017 guidance, looking back, having hindsight to your benefit now, what would you have done differently? And how will that impact you with thinking about giving longer term outlooks in the future? Thanks.
Yes. Neil, do you want to start this one and then I'll jump in?
Sure. Thanks for the question, Scott. When we were about a year ago today and we have a 3 year plan, we present to Board a 3 year operating plan every July that's been a pretty high level of detail. So we didn't pull the numbers for 2017 out of the air. We had a plan that we were talking about at that point.
Clearly, we wouldn't have known about the asset sales. That was new information, and there's no way we would have indicated or predicted that. We probably could have taken the opportunity when we made the check impairment in May to talk about the long term outlook and the impact that was going to have on that then. If I had it to do over, that's probably a thing we could have talked about then. It wouldn't still wouldn't have been something we could have anticipated this time last year.
But then the 3rd component, in hindsight, we wish we had challenged more the assumptions we made in our plan for 2017 around ARPC and the small business area because, frankly, and I'll take a shot at oversimplification, but we made some assumptions around average revenue per customer, for QBO that were
more like a desktop customer. And as
we've learned and as you've heard discussed, They're coming They're coming in not as mature, not with the same volume of payments activity, not with the same number of employees as a traditional desktop customer. So that's one of the things that we had in hindsight, we would have challenged that more closely and maybe tempered it a little bit. It's not going to be our practice to give longer term guidance. The only reason we did that last year was really to kind of help people understand when do you think this ratable transition is going to be done and what do you look like when you're finished. And it was in that frame that we really talked about revenue, EPS and QBO subs for 2017.
I still think that was helpful, but I think we could have been more thoughtful about the guidance we gave initially, especially in terms of revenue and EPS, and we probably missed a couple of opportunities to update it as we went along and things changed and we made decisions that had an impact on the longer term outlook. So that's where we are.
Perfect. And then just a separate subject, maybe even with Neil getting involved again. But it's interesting with the high end, low end on Slide 112 of what you think for the $4,000,000 to $4,500,000 The slower global expansion comment for coming in the high end. Could you just talk a little bit deeper on how much of a lever that is and what type of decisions you'll be making with regard to that, the investments there? Thanks.
Yes, I will. There's 2 components to it. 1 is in our control and one of them is going to be just how we continue to compete in the marketplace. So what's in our control is the decision to open up another market after France and Brazil. And one of the things you saw is we've now moved to this acceleration platform, which gives us the ability to go in and localize the product and really make it ready for that market in a shorter period of time than we used to.
We've also learned some important lessons around it's important to go in and make sure that you are delivering that customer benefit better than the best local alternative before you start to pour in lots of go to market and try to scale the business because your brand has actually formed one customer at a time. And so, we have choices and we're going to make sure we don't repeat some of the lessons that we had in the 90s when we went 20 some plus countries very quickly and we didn't do so well in those countries. So that's the controllable piece. The less controllable piece is going to be just how the mix plays out. QBO US continues to grow and we've got lots of headroom to continue to grow in the US and of course there are more mature customers and we've got more of the ecosystem available.
And then outside the U. S. Are going to be the markets that are going to get those attach rates over time. And so less global expansion, today we've got our best to assume how much of it will be in U. S, how much will be non U.
S. And that's factored into that $4,000,000 to $4,500,000 But if that mix plays out differently, then that's one of the things that moves us further up in the 4.50 range. Or if we choose to open up another market or another 2 or 3 markets, they may actually move us in another direction because they come in smaller, the earlier lifecycle and we're going to be investing to grow those markets. So that's the 2 components that kind of breaks out global expansion with the word slower being sort of a modifier. Does that answer it?
Okay, great.
Yes. Ron Melanchoe from Barclays.
Two quick questions. First, if you get all these new users, they're coming more on the lower end or international. Can you talk a little bit about to attrition and evolution of attrition? I mean, you saw the numbers like the 70%, but obviously, Harmony is relatively new. You're new in these markets.
How do you see that evolving? First question. And the second question is, obviously, a lot of people are comparing you to Adobe and that transition, but it's different as we see because
it's more new users at
the moment that there's still kind of the lingering hope that the desktop will migrate eventually more. What are the new features what are the new features that you're kind of building in at the moment with inventory, etcetera? What will they do to kind of convince more customers to migrate? And what can you do to maybe change that trajectory?
Yes. So I'll take those. There's some very good points and I want to make sure that I cover each one of them. The first on attrition, look at the total because what we're giving you is Dan walked through cohorts. So you go all the way down to 30% for new.
That by the way, there's a U. S, there's a non U. S. Component that someone asked me during the break. They're pretty consistent.
Dan, is that fair? Yes.
The cohorted attrition that we see in global markets is really driven by how compliant the product is in market. And so in the markets, like U. K. And Australia, where we've made the multiyear investment, we're seeing similar attrition rates already. In a place like India where the investment has lagged and the product is less compliant, we see higher attrition.
But on the whole, when we're in a market, we're seeing relatively the same attrition levels. Self employed has been interesting. Self employed attrition rates have actually been a little bit better than the QBO U. S. And one of the really fascinating components about it is when we see them attaching to TurboTax, those retention rates are the highest.
And there's a cohort that came in that we did some testing with on a quarterly basis with the tax product that we're seeing really strong retention. And so while the ARPC is lower on these products, we're actually seeing pretty similar or at this point better in SC on retention. Now the self employed may change as we really scale that up, but that's where we keep watching every cohort to make sure that we continue to improve the experience to offset the quality of
the lead that comes in. And I'll go to the second and the third piece of your question. Thank you, Dan. We admire Adobe, very close relationship. We've shared best practices over the years.
Have personal relationships with every leader over there. And our models in some ways look similar and in some ways as you point are very different. We're bringing in many more new customers. They have a transformation they're going because they have a market share position and they're able to move existing customers over. The one thing I want to make sure that we distinguish and we've said this consistently since we started this, we don't worry if a customer wants to stay on desktop.
What Dan showed is there's no new features being developed for desktop. Desktop.
Our R and D resource and burn through
are on QBO. We're making enhancements to the experience and the average revenue per customer for desktop is actually going up. It increased 8%. Dan showed that number. What we do want to do though is we want to create a carrot, not a stick.
We want to entice the customer because we fundamentally believe for the small business to succeed and for them to thrive, so we thrive, they're going to have to make a move to the cloud and be able to tap into mobile devices over time. So all of the things that you saw on Dan's slide that said here's what's coming in fiscal year 'sixteen, deeper inventory capability, which gets more product based businesses in, who by the way come with employees. And so instead of that 40% of QBO having employees, it moves up closer to desktop at 60%, which gives us more opportunity. That's one thing we can do. Making it easy to get set up.
In the desktop, it takes 40 minutes to set your QuickBooks up. And then after that, you've got to input all your employees, you've got to input all your suppliers, you've to list all your customers. In the cloud world, we can start to pull that data in and start to prepopulate that into a never enter data at all model and that will hopefully entice customers over. So, those are the things we're trying to do to get more people excited about the cloud. In the meantime, if they don't want to go to the cloud, we're going to continue to bring new users in and we're going to protect that base.
No other cloud competitor can get them from us because if we can't get them to move ourselves to our own cloud, it's going to be really hard for competitors to say, we'll come to our cloud. And so we feel pretty good about that business model right now.
Keith Weiss from Morgan Stanley. Thank you
for having this presentation today. Very helpful. Extending on Raimo's question
a little bit on that desktop base, it kind of seems like you guys were trying to use the stick before a little bit on desktop in terms
of price. Can you talk
to us about how you're thinking about pricing on desktop? What you went through in the past year and how that's changed and what
you're expecting to do on a
going forward basis on price? Yes. So I'll tell you a couple of pieces here. One of the things we did test last year is we had tested a very deep promotional discount for a very short window of time. You remember last year I talked about 1100 test sales, doing a conjoint analysis and looking for what would be the right price point to get people to maybe move off the desktop and into the cloud.
And we ended up finding out that that really wasn't going to be a sufficient lever. So as Dan said, we didn't change our promotional pricing strategy on QBO. We did take the price of desktop up and we raised the promotional floor on the desktop business through the retail stores And we started to see that that really wasn't being helpful because it slowed down decision purchases. And so what we've done instead is we've done more pulse promotions where customers can come in and get a price that what they consider to be a fair price. And so we've backed off on we don't need to get super aggressive on QBO pricing because that's not the level that's going get customers to the cloud.
It's more feature functionality and their personal comfort level of doing that and their accountant recommending it. And on desktop, we have opportunities to raise the price which we have, but to have promotional pulsing that allows us to customers to come in and make purchases and that ultimately still raises the ARPC. As Dan said, we've got more established businesses staying in the base and our average revenue per customer on desktop went up 8%. And so it's part mix and part of that's just being smarter about pricing. So those are really the 2 fundamental differences.
Thank you. You're welcome.
Jim MacDonald with Johnson. First a factual question. Could you give us the ratable impact for QuickBooks
that you're expecting for 2016 2017?
Okay. Neil, ratable impact for QuickBooks Desktop 2016, 2017?
It's going to be gone by 'seventeen, Jim, and the impact for 'sixteen is probably couple of points of revenue growth, call it $40,000,000 $50,000,000 Couple of points on the SPG revenue. Yes. Nothing in 2017.
Okay. And then changing gears totally. On tax, if they do something on the earned income tax credit, can you talk about how you're viewing that in terms of the impact on online tax? Yes. If they make it more complicated.
That can't well, one of the things that we're doing in concert is all of the industry is working with the IRS to make sure that we get cyber fraud out of the U. S. Tax system. And one of the things we all agreed to is instead of imposing the same methodology that DIY has on an assisted tax preparer or vice versa, that that's actually prescribing the how and it may or may not change the outcome on whether we're successful. So, we've all agreed to a standard, which is 0 fraudulent returns in the U.
S. Tax system. And now what we've done is we've agreed that we're industry going to be running experiments, DIY experiments. And keep in mind, we do almost as many returns in our pro tax business. So we have just an equal investment to making sure that assisted returns are done well as we do the Alain.
We're running experiments there and then we collectively agree to the part of this information sharing that whichever one of those may prove to be the best way to reduce any kind of fraud if it's earned income tax credit, then we will collectively look at that as a new methodology that the industry should look at and adopt. So right now, we don't believe there's anything. We have data we've shared and we've shared with the IRS and with our peers in the industry that says we have not seen a spike in our particular customer base in fraudulent returns in EITC versus anything else we've seen. But at the same time, we're equally committed to making sure that if someone has a better mousetrap that we continue to run experiments and we find new methodologies, we're going to share that as well. So I don't think there's going to be any impact to us that's any different than any assisted method, whether it's a tax store or a CPA or another do it yourself software
Thanks. Hi. Brad Zelnick with Jefferies.
Hey, Brad.
Brad, two questions. First, just back to tax, assuming that you're successful leading the industry in stemming fraud, how is that not a headwind to the business this year to the extent you're successful?
A headwind in terms of?
Number of units that come out of the system that were there last year.
Yes. Well, first of all, it's good long term because if citizens lose faith in the U. S. Tax system, we've got a bigger problem as a country as well as the tax industry. So that is the usual goal that everyone's focused on.
What no one can size today and tell is how much fraudulent activity is actually in the U. S. Tax system because there's been no information sharing up until this most recent summit between the IRS being able to tell us what we sent them as a leads report, was it really fraudulent or not, and for them to be able to say adjust your algorithms because you're catching good guys instead of bad guys. Now we have that methodology in place and we're going to get better. If we're collectively successful and there are fraudulent returns in the system, the water level will go down for the entire industry in the category, but that won't shift share and it won't necessarily shift who's got more paid customers versus not.
And keep in mind, fraudsters are business people. They want to maximize profit. And so many times they come in using free tools, but they don't pay anything, they may show up in a customer number, but they may not show up in revenue. So whether it resets revenue is yet to be determined. But if they're in the system, everyone will ultimately have a water level reset, including the IRS and the number of returns.
But it won't shift share, it won't do anything else if we're doing the right thing. And so that's the way we look at it is, A, we've got to get it out of the system and B, if it ends up being successful, it will be an industry wide success and it will collectively reset all of us. And I don't think that will be a headwind because we don't build our business based upon bad actors coming in. We build our business based upon honest taxpayers and I think over time it's only going to be good news.
That's helpful. And just my second question may be more appropriate for Neil, but if I look at the share count assumption in the new fiscal 2017 guide, at the midpoint, it would seem to indicate roughly the run rate of buybacks that you've been doing over the last, I guess, last year, if we assume that forward. So if we then look at the divestitures, is that accounted for in that wide range? And also is there any early sense of the market value of those three businesses?
Okay. Let me hand that to Neil. Neil, you want to take that?
Yes. We have a level built into our plan for 2016 to 2017 that's pretty consistent with the level of cash buybacks that we've made for the last few years. Clearly, with the stock price where it is today, it's going to retire a lot more shares probably than we had in the plan, and that moves us up
closer to the top end of
the range. At this point, we haven't talked about the anticipated cash from the divestitures of the assets, and our bankers here in the room, so I'm going to have to I'm going to low key that a bit. But we got an estimate of the range. Right now, the thought process is that we would probably use that to retire additional shares later in the year. That's that would move us to the higher end of that range.
When I put increased share buybacks on the left hand side of the chart, that comes from retiring more shares than we had in the plan or having additional cash flow to use to allocate to share repurchase, these asset sales are the most likely candidate for that. Okay. Brad, thanks. I love what you're doing
in QuickBooks Online and I appreciate the more focused refined strategy. And I understand the guidance for FY 2017, you're not fully through the transition at that point. You're typically a conservative company. But I'm curious how you think about that guidance in the light of the financial principles of the 10% organic growth and margins increasing over time because clearly from FY 'twenty 13 or FY 'fourteen base won't be hitting the top line goal. And it also if I look
at the guidance, the margins will
be down point to point. So I'm just kind of curious how you think about that multiyear context and then relative to the financial principles?
Yes. And let me have Neil take that one because I think one of the things Neil you tried to articulate was what we do see in 2016 and 2017 on both revenue growth as well as operating margin expansion. But you can take Paul's question on and then I'll add my top spin on.
Sure. Yes, I think, Paul, clearly some of the asset sales and we've done some things going way back to the disposal of digital insight that takes revenue out of the earnings stream and takes it off the table. We do those so because we didn't think they were strategically tight, didn't have great opportunities for growth as much as other parts of the business. And I think that parts worked well for us. One of the things that we have confidence in now is that the strategy is tighter than ever and that enables us to be much more focused on where we invest and where we spend our time than we ever have before.
So if you look back, there's a lot of noise with things coming in and things coming out as we bought assets and divested. But the focus going forward is very clear, and I think we feel very comfortable with those organic levels. In terms of the margin, I think about mid-30s as really being a good balance between some of the investments we want to make with global expansion, we see opportunities there, Building out the products more robustly, including enhancements around security and privacy that Tayla and Laura talked about. So it's a bit of a trade off. We're certainly not maximizing to say how big can we make the margin.
We're looking for a sweet spot that delivers for our investors in the short run, but also really builds in value over the long term. We really applied the True North framework a lot internally where we solve for short and long. And so a margin in the mid-30s to me at the total company level is a good balance and trade off for short and long.
Okay. Thanks, Neil. Other questions?
Brent, your goal is to be a small business operating system.
Yes.
But to achieve that, it would assume that you have to deal with the front office. And a lot of competitors have been a lot more aggressive, whether it's Shopify or GoDaddy. You go through the list. And I know you've refined the strategy to go more focused. But do you feel like you have the partnerships in place that you could walk into a client and say, hey, we have the right integration hooks to make this a really easy experience going back to the 15 apps you have to use to run a business.
Most of these small businesses we talked to want to run it with 2 or 3. So can you just talk through your overall strategy longer term?
Yes. So when you take a look at small businesses and we say that 15 to 20 different apps, the things they share in common, they've got to get customers, they've got to take money in, they've got to pay money out. Somebody is owing them something and they've got to pay bills. So right now we've got 2 thirds of that, which is the money in, money out, which As you know, we As you know, we've also aspired to that third element, which is getting customers multiple times over many years. We bought a website business.
We weren't able to prove the ROI on that. Small businesses thought they'd do a template driven website, stick it up there and wait for the customers to come in. They quickly discovered they fall down the search rankings because they never update the web page after the first time they build it. They get frustrated and they turned off and we ended up with about 50 percent attrition rates on those kinds of customers. So we found that a better home.
We've got Demandforce. Demandforce actually had a proven ROI. It's 3x the investment you would get because you could actually measure the number of appointment cancellations going down, but it's a highly vertical product that tends to be on the higher end of our customer base. It didn't really fit. We tried to find ways to build a lower end version and we couldn't get that to work.
So we're finding it a better home. One of the things we are seeing though is there are lots of vertical solutions like that that are getting traction and we're saying, okay, have that work with QuickBooks. Now over time, one of the things you have on your platform is if you see success starting to happen and something that's meaningful, you always have a choice, which is lean into that partner more or maybe see if that partner and you have the same vision and maybe you become a part of the company. But today, we've been clear with our partners, that space is a space that we are not in today and we want them to solve that problem and to work really well with our stuff. Over time, when we revisit that third key lever that all small businesses have, we may, but today we don't have that as a part of our strategy and it's born from scar tissue and the fact that others are solving that problem better than us.
And our mission is about solve a problem better than anyone else can solve it today and we have improved and we can. So that's why it's not in our core strategy.
One last one
here, Brad. Okay.
Thanks. It's a 2 parter, Brad.
Sorry, 2 different ones, but we'll finish with the bang here. In tax, for the fiscal 2016 outlook, revenue per return guidance is plus 1%. Now last year came out a little
bit better than expected, and
I don't think that was the anticipation going into the year. With absolute free and then obviously you had some other subsidizing strategies last year to make up for price. I'm just curious what is in that number? What are some of the levers that you may pull to get there? Thanks.
Okay. Yes, first of all, and you hear each of the leaders talk about this, for us revenue per return or average revenue per customer is actually an output. We don't go in and solve for it. We solve for category growth, customer growth, solving additional problems which brings in mix and attach services and at the end of the result that adds out to be some average number, like an average revenue per return or average revenue per customer. And so, what you saw in Safran's chart, which I thought was pretty important because can tell you from being in the company for a while and having run TurboTax back in 2004, 2005 when the first free version hit the commercial market, The spook has been, uh-oh, that's going to drive this thing down to 0.
Free has destroyed the market. And what Stefan showed is over 10 years, despite free, we've gone from $29 average revenue per return to $49 average revenue per return. The category has grown, the customer has grown, our share has grown, net promoter has gone up and our revenue has gone up. And so, what's in that assumption today is Sasan and the team have sat with me and Neil and said, here's what we think the IRS total returns will be. Based upon the look back at the last 3 years of digital category growth and if you look at our competitors' last earnings calls themselves, how many of their returns came in through stores versus software and ours, you can forecast that out and say, here's where we think the category will grow.
And then we're of course going to be competitive and we think our products will take share. That's really what drives those numbers. And then the last piece is, if mix plays out the way it did, that's about a point. If Sasan is as successful as he and his team have been, which is getting more monetization of its free customers, getting a better mix, and if we do that, outcome that says, if we do all these other things, this is the number. And by the way, if we just assume that says if we do all these other things, this is the number.
And by the way, if we just assume nothing changes there and we don't improve, that's about a point. So you can call it prudent, you can call it conservative, but I can tell you it's an outcome. We're not building in price increases. We're not going to do anything unnatural. We're going to go after category growth and share.
Thanks. And then just my last one is for the announcement in the press release this morning about going into financing. Certainly, we can see that could be a tremendous opportunity. Just looking at a bunch of years, and I know it's just kind of early times right now, but where do you envision that becoming? What are some of the things you may want to avoid risks that you could see building out a model like that?
Thanks.
Yes. Would you like to talk to this one, Dan? And then I want to add one piece, which is something I'm not sure got caught up in the Wall Street Journal article this morning that had us lumped in with a few others. I just want to make that distinction. Go ahead.
Yes.
I think one of the if you back up, we're sitting in a very unique spot in terms of the data that our customers have, because we're not only looking at transactional sales volume, but we're looking at things like the receivables coming in, their payables and some of their current behaviors like bill payment and types of credit quality of their customers. And so there's a lot of stuff that we have. And what we've been doing historically is we've been linking them to lenders. And one of the challenges that we've seen in the marketplace is, there's lots of people who are good at 2 of the 3 things that we think are important. And those three things are getting a really good rate, the speed of the financing itself and the pain of going through the process of the financing.
So there's sort of the decisioning and there's the pain that the customer has to go through it. Most people are good at 2 of those. And so what we've discovered is actually our base has high credit quality, but oftentimes they're not great at managing their cash flow and so they need money fast. And that combination is really not in the marketplace. And so what we're doing is linking to the people who are very good at using data with the sole purpose to reduce rates and to get them cash.
And when we talk to the different partners that we have in the financing side, there is a very expensive cost of acquisition in the marketplace. In our case, there's a very low cost of acquisition and there are high credit quality customers. And so we're trying to build something that's unique and different. And we have a partnership with the company OnDeck and OnDeck has continued to bring their rates down within our base. And our goal is again not to get those rates up, but to keep moving them low enough.
Now if you look at the business opportunity, it's a pretty significant business opportunity. In fact, when we think about what's made payments and payroll successful, it's the same thing. It's a low cost of acquisition to the customer base and a unique use of our data relative to alternatives in the marketplace and this data integration, the seamless integration of data. And so we think this could be a third leg in terms of services.
Yes. He just did a wonderful job. I would summarize it with ease, fees and speed. The ability to actually get and apply for a loan easy with all the data we have, the interest rates coming down because we're sending very qualified customers to these lenders who in turn are bringing their rates down because we're taking the risk out and the speed, which is what the Wall Street Journal had a slightly different take on today is banks often take weeks or months and we can get this done in a day or a matter of days. And that's why small businesses need cash flow on their hands.
Okay. I know we have a lot going on today. There's other earnings coming out. I think the Fed may be meeting and I don't know if it's come through or not and you have opportunities to see other things out there. So thank you so much for your attention today.
Thanks for allowing us to try to unpack some of the lessons learned as well as some of the go forward strategies and we look forward to speaking with you again soon. Have a great day.