直覺電腦 (INTU) 2006 Q4 法說會逐字稿

Good afternoon.

My name is [Patty], and I will be your conference facilitator today.

At this time I would like to welcome everyone to the Intuit fourth quarter and fiscal year 2006 conference call. [OPERATING INSTRUCTIONS]

With that, I will now turn the call over to Bob Lawson, Intuit's Vice President of Investor Relations and financial planning and analysis.

Mr. Lawson.

Thanks.

Good afternoon, everybody, and welcome to the Intuit fourth quarter and fiscal year 2006 conference call.

I am here with Steve Bennett, Intuit's President and CEO, and Kiran Patel, our CFO.

Before we get started I would like to remind everyone that our remarks will include forward-looking statements.

There are a number of factors that could cause Intuit's results to differ materially from our expectations.

You can learn more about these risks in the press release we issued earlier this afternoon, our form 10-K for fiscal 2005 and our other SEC filings.

All of those documents are available on the Investor Relations page of Intuit's website of Intuit.com.

We assume no obligation to update any forward-looking statements.

Some of the numbers in this presentation will be presented on a non-GAAP basis.

The most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to GAAP are provided in today's press release.

After this call concludes, a copy of our prepared remarks and supplemental financial information will be available on our website.

With that, I will turn the call over to Steve Bennett.

Thanks, Bob, and thanks to everyone for joining us here today.

Let me start by saying how pleased I am with our results for both the quarter and especially the full year.

Fourth quarter revenue of $343 million was up 14% year-over-year.

Non-GAAP diluted EPS was a loss of $0.03 versus a loss of $0.04 in the year ago quarter.

On a GAAP basis diluted EPS for the quarter was a loss of $0.06.

QuickBooks delivered another strong quarter with revenue up 13% to $213 million.

Turning to the full year, revenue was up 15% to $2.3 billion.

Non-GAAP operating income was up 18% to 654 million and operating margin expanded from 27% to 28%.

On a GAAP basis, operating income was up 7% to $560 million, and operating margin declined from 26% to 24% primarily due to the expensing of employee stock options.

Non-GAAP EPS was up 20% to $1.21, and GAAP EPS was up 15% to $1.16.

We had a strong year overall with outstanding growth in our two big businesses, QuickBooks and Consumer Tax.

I will talk about why I am feeling confident going into fiscal year '07 in a few moments, but first I will turn the call over to Kiran to walk us through the segment results for the year.

Thanks, Steve.

We wrapped up a great year with a solid fourth quarter.

As you know this is our seasonally slow period, so I will focus my comments primarily on the full year.

Our QuickBooks-related segment finished the year with another strong quarter, revenue of $213 million was up 13% year-over-year.

For the year, QuickBooks-related segment revenue of $862 million was up 14%, well above what we expected and planned as we entered the year.

A strong growth in QuickBooks this year was driven by continued success in two key initiatives.

First, acquiring new customers and second monetizing them through upgrade and add-on services.

We acquired approximately 600,000 new QuickBookss customers in fiscal 2006.

In total, we estimate that we have approximately 3.7 million active QuickBooks users.

And we continue to move customers to higher end versions of QuickBooks with QuickBooks premier unit growth --premier units volume growing 25% and QuickBooks enterprise solutions unit volume growing 42%.

Additionally, we continued to see great success in monetizing QuickBooks customers through add-on services.

Revenue from our standard and enhanced payroll offerings grew 23% over last year, and revenue from our payments business grew 47%.

Next Consumer Tax had another terrific year posting its strongest revenue growth since fiscal 2002.

Revenue of $710 million was up 25% over fiscal 2005, driven primarily by strong growth on the web.

TurboTax units dressed 20% excluding free file.

Pro tax revenues of $273 million was up 3% over fiscal 2005.

The Intuit-Branded small business segment had revenue of $61 million in the fourth quarter, up 1% over the year ago quarter.

For the full year revenue was $252 million, up 9% from fiscal 2005.

Note that the comparison for both the quarter and the year are affected by the sale of Master Builder during the year.

Excluding Master Builder, the segment grew 8% in Q4 and 11% for the full year.

Our complete and assisted outsource payroll offerings continued to perform well with customers up 17% year-over-year.

The other business segment which includes Quicken in Canada had revenue of $48 million in Q4, up 17% over the year ago quarter.

For the year segment revenue was $246 million up 13% over fiscal 2005.

Moving to the balance sheet, the Company had $1.2 billion in cash and short-term investments at the end of fiscal 2006.

During the year we generated $595 million in operating cash flow from continuing operations.

We also received $279 million in cash from employee stock programs, and $172 million in cash from the divestiture of our ITS business.

Under the stock repurchase program we used $4 million to repurchase 160,000 shares in the fourth quarter.

We did not repurchase stock while the independent review of our historical option granting practices was under way.

As you know, we announced on August 16th that this review found no evidence of fraud or intentional wrongdoing, and we do not anticipate any restatement of our previously filed financial statements.

For the fiscal year we returned $784 million in cash to our shareholders by repurchasing 31 million shares.

We have approximately $507 million remaining in our currently authorized repurchase programs.

Before I share the outlook for fiscal 2007 let me describe a change in our reporting segments.

To reflect the new management structure and to align our external reporting more closely with the way we think about our businesses, we have changed our business reporting segments for fiscal 2007.

The new segments are as follows: QuickBooks, which includes QuickBooks software and support, as well as financial supplies, Payroll and Payments, a new segment which includes QuickBooks standard and enhanced payroll, outsourced and assisted payroll, and our merchant services business, Consumer Tax and Professional Tax, both of which are unchanged and other businesses which include Quicken, Canada and the U.K. and IDMS and IRES.

We provided an updated fact sheet on our website that reflects these new reporting segments.

Now let me share our guidance for fiscal 2007.

We expect revenue of $2.53 billion to $2.58 billion, a growth of 8 to 10%.

We expect the following revenue growth by segment: QuickBooks, 8 to 12%, payroll and payments 12 to 16%, Consumer Tax, 10 to 15%, Professional Tax, 0 to 5%, and other businesses, 0 to 5%.

We expect GAAP operating income of $620 million to $646 million.

We expect non-GAAP operating income of 720 to $746 million or year-over-year growth of 10 to 14%.

We expect GAAP diluted earnings per share of $1.18 to $1.22.

We expect non-GAAP diluted earnings to be per share to be $1.36 to $1.40 or year-over-year growth of 12 to 16%.

We expect capital expenditures to increase from $82 million in fiscal 2006 to approximately $140 million in fiscal 2007 as we expand facilities to accommodate our growing businesses.

For the first quarter of fiscal 2007 we expect revenue of 335 to $350 million.

GAAP operating loss of 114 to $99 million, and non-GAAP operating loss of 90 million to $75 million.

GAAP earnings per share of loss of $0.18 to $0.16, and non-GAAP earnings per share of a loss of $0.14 to $0.12.

Before I turn the call back to Steve, let me remind you that we have included revenue and EPS guidance for all four quarters of fiscal 2007 in our press release and accompanying fact sheets.

As in the past, we expect to see revenue shifting between quarters due to several factors including revenue recognition, changes in consumer buying habits, and tactical marketing decisions.

Steve?

Thanks, Kiran.

As I said at the start of the call, we're feeling very good about the year we just ended and the year we just started.

We're continuing to execute our growth strategy being in growing high profit business and is attractive new markets with large unmet customer needs that we can solve well.

We're positioned to grow in these markets by making products and services that are easier to use and offer better value than alternatives.

We do this through an intense focus in proven methodology to make customer experiences better on existing offerings as well as launch new offerings that solve important additional customer problems.

Our offerings enable us to grow our markets ,winning new users by converting non-consumption as well as disrupting higher priced alternatives.

We also have an opportunity to expand share of wallet with existing customers by selling additional products and services.

Since we've been doing this for many years, we've built large customer bases and eco systems that generate positive word of mouth and establish competitive advantage that is hair hard to duplicate.

That's what's been going on at Intuit for quite a while.

We're getting even stronger and better at executing this recipe for success.

We're optimistic about continued growth in Small Business and Consumer Tax.

Today 60% of small and medium-sized businesses in the U.S. still don't use any specialized accounting software.

We also have continued growth opportunity in our large attached service businesses.

Payroll and payments are among our fastest growing businesses.

We estimate that our current payroll penetration is only about 40% of the opportunity within the QuickBooks base.

Similarly, we have approximately 10% penetration of the payment opportunity just within the QuickBooks base.

We'll share more about our growth opportunities with QuickBooks, payroll and payments at Investor Day on September 20th.

In TurboTax we have significant opportunities to continue to expand the self-prep software category.

Either desktop or Web-based.

Today 73% of the nation's tax filers don't use software to prepare their taxes.

It is the fastest growing of all tax preparation methods, growing at a compound average annual rate of over 10% over the last five years.

We believe the growth is driven because do it yourself software is the best value proposition as evidenced by the highest net promoter score of any tax preparation method.

We believe our net promoter efforts to create delighted customers and positive word of mouth will continue to grow the self-prep category well into the future.

This effort drives growth by helping us acquire more new users as well as increase the retention of existing users.

With approximately 70 to 80% of our revenue coming from recurring or highly predictable sources, we have a strong, stable revenue base from which to grow.

Add to that our business model, which delivers margin leverage and cash generation, and we are positioned for success in fiscal 2007 and further into the future.

With that, I want to thank our shareholders for your continued support and thanks to all the Intuit employees who helped deliver another great year.

With that, let's get to your questions.

[OPERATOR INSTRUCTIONS].

Our first question comes from Heather Bellini of UBS.

This is [Umpai] for Heather.

Congratulations on a great year.

It has been a great year for you guys.

I just wanted to get a feel for this 8 to 12% growth behind QuickBooks segment.

What would be the primary drivers next year?

Would it be volume growth?

Are you looking at pricing leverage or are you looking at some new product offerings there?

I think it will be the same things that we have done in the previous five-plus years which is we work all of the elements of driving revenue and profit growth.

Number one, unit growth because we have great volume leverage.

You've seen that we continued to ramp up the number of new users we'vw acquired.

In addition to that, we have mix as more and more people are buying higher valued, higher priced products.

We also think we have some potential price opportunity within QuickBooks, and we continue to manage costs and expenses well, so we continue to work all four of the levers that drive revenue and profit growth each based on our ability to maximize the total based on the current competitive market that we're in.

Thank you.

Our next question comes from Laura Lederman of William Blair.

Yes, very good year.

Like to follow up in on the last question, you just indicated that you would be looking at increasing the prices maybe of QuickBooks.

Can you talk about what you've increased pricing in the past, and what types of price increases you're looking at, and I realize you don't want to be too specific given the customers out there, but if you could give us a sense of that, that would be great.

I think we look at all of the different products on a continuous basis, and we do different things with rebates.

Last year we had a rebate that we eliminated this year, a $20 rebate for QuickBooks Pro based on the Microsoft entry, and I don't think there is any specific answer I would want to give going into the year other than to say we work all of the levers, volume leverage, acquiring new units, upgrade rates, price and mix plus expense to deliver the kind of great results we've had the last two years, and I think it is important to realize in both of our big businesses, TurboTax and QuickBooks, our businesses that perform better than we expected in both of the last two years, and we go into this year with more momentum than we've ever had.

Hello?

One moment, please.

Our next question comes from Adam Holt of J.P. Morgan.

Good afternoon, guys.

Congrats also on the year.

Thank you.

I first had a question actually about the fourth quarter.

It looked like you actually saw an acceleration in QuickBooks revenue against what appeared to me to be the toughest comp of the year.

You had some puts and takes on the unit side.

It looked like Simple Start Basic was down year-on-year but you saw real good strength in some of the outsourcing businesses and at the enterprise level.

I was wondering if you could identify what the one or two factors were that really drove that acceleration in QuickBooks given some of the movement around units.

I think one of the things is that we continue to improve our marketing.

We've continue to upgrade our sales force, our telesales force.

We hired a -- we have a strong team.

We hired a new senior leader about six months ago who came to us from Oracle whose been doing a nice job.

We hired new marketing people.

We dramatically improved our web marketing skills.

We always, Adam, had a big focus on making our products drop dead easy to use and better value and we won with products and I think what you're seeing now is we're starting to really get traction on the marketing front.

It was clearly true of Consumer Tax business this year.

I think you actually see us firing on the two big drivers of growth which is better offerings and also better marketing, and I think that's what you're start to go see and drove performance in the fourth quarter.

And just to follow up on QuickBooks, if we look at how the year will flow next year, obviously the comparisons are tougher in the first half.

Do you think that the growth to get to that 8 to 12% will be more back end loaded or should we still look for the majority of the growth in the big kick off quarters for QuickBooks?

I think as every year it is hard with year-over-year comparisons because the timing can shift, and I think it is -- I think the quarterly splits will probably be more like Consumer Tax.

We might change the time when we launch it.

We might pull it in a little bit.

That could dramatically change the quarterly comparisons.

I would be nervous to give you too much information here, but I would be nervous to have you just look at the patterns for last year and use those.

I think, Bob, what would you say to that?

I think that's fair.

I think for the year 8 to 12, we feel great about 8 to 12, and we'll continue to see some quarterly shifts based on launch dates and other factors and mix and that kind of thing.

Subscriptions as you know, Adam, also impacted revenue in QuickBooks where over the last couple years we've grown our deferred revenue balance as a greater percentage are sold on subscription.

Just one last question if I could on the guidance.

Historically you've guided to sort of really low expectations for new product areas.

I was wondering if you could talk about two areas in particular, and what if anything is in the guidance for next year.

That would be the healthcare product as well as on the tax side, the assisted higher end version tax solutions.

Thanks.

Nothing material.

Great.

Thank you very much.

Yep.

Our next question comes from Michael Millman of Soleil Securities.

Thank you.

Several questions.

First, the 30,000 foot question, long-term you're looking for double digit revenue growth, but each year you start out with less than that.

Could you talk about what it might take for you to look for double-digit revenue growth prior to the year, and then just some quick questions as to your share repurchase last year you reduced shares by about 16 million.

You're guiding about 5 million this year, and also could you give us the R&D and G&A growth this year excluding stock comp?

Thank you.

So on double-digit growth, I think, Michael, the hardest thing for us to predict is how fast the category is going to grow.

I would defy anybody in the following to tell me how fast the software prep category is going to grow next season.

There is so many variables in that, so therefore we look at the facts historically and, this year it grew a lot faster than we thought.

We would have never planned for 56% unit growth on the web, and that's why we dramatically exceeded expectations.

It is a very hard thing to do to sit here and bake on aggressive category growth that's much bigger than what the historical compounded average has been of 10%, so I just think it makes sense to not build more market growth in that happens on something that we only control indirectly.

On the share repurchase, do you want to take that, Kiran?

Our policy and strategy hasn't changed as we continue to generate strong cash flows from the business we are committed to returning cash to shareholders.

Last year we repurchased, used about $784 million.

Our overall strategy hasn't changed.

The difference between the delta last year versus our outlook is really an estimate on what we think employee stock option exercises might be.

It is at best our guess at this stage, but we factored that in as the share price increases.

On the R&D and G&A, the simple message last year and the simple message for '07 is R &D is growing a lot faster than G&A.

G&A is growing less than revenue, R&D is growing faster than revenue as we are reallocating resources so things like the last two years that are going to drive faster long-term growth.

Just to add to that, R&D grew 120 basis points this last year, and we funded that with 160-basis point reduction in selling and G&A costs.

What do you expect '07 R&D growth?

We'll tell you at this time next year.

Thank you.

You have to guess on that one, Michael.

Our next question comes from Greg Smith of Merrill Lynch.

Hi.

Good afternoon.

In the quarter was there a Quicken loan loyalty payment, the interest and other jumped quite a bit.

I think you had the same thing last year.

Yes.

Can you size that?

No.

Okay.

I can do a little math.

Sorry, Greg, 7.5 million.

Okay.

Thank you.

And then, Steve, can you talk about the acquisition pipeline?

Is there any chance you would do anything larger?

You guys have been fairly quiet, just small tuck-in stuff.

Any reason to expect anything different over the next twelve months?

I think it is a fair question.

Because as I talked about at Investor Day last year, we have really focused an intense amount of energy on our two big businesses for the last three years actually and only made one material acquisition in IMS that turned out to be a home run for us.

I think based on how the company is running is we have managerial capacity to be looking to accelerate revenue and profit growth through acquisitions, so let's see what happens as we go through.

It is something that is on my radar screen now.

It had been off the radar screen previously, but we're only going to do really great deals as I said before, we made mistakes in some of the companies that I bought before, the stand alone platforms that are too small, most of the stuff you will see now would be stuff that is accretive or adjacent to our big businesses which are small business, tax and accountant, so I think it is a good question.

You might see some things happen during the year, but obviously it is too early to predict on that.

I will tell you because of the good shape the Company is in and my focus on continue to go grow faster, there may be some things we'll see in the year if we can find the right kind of candidates and get deals closed.

Back on the options investigation, you have done your internal review.

Should we expect to see or hear anything, let's say the SEC and the Department of Justice come to the same conclusions.

Should we any announcement from them or you or is it possible it just kind of lingers into perpetuity.

Depending on how they react.

The uncertain thing is whether they will react or not.

We have a meeting with them scheduled coming up here to present the findings, and if they have anything they say like it is closed, we'll communicate it.

If not, sometimes they just don't close the loop, so we'll have to wait and see.

Okay.

Thank you.

Our next question comes from Jim Macdonald of First Analysis.

Good quarter here.

Following on Michael's question on guidance, any thought on why you don't widen your ranges? 8 to 10% revenue growth is pretty narrow as we found out this year.

My second question is with your new payroll and payments segment, does that say anything about your commitment to outsource payroll and just thoughts on why the growth is slowing for that segment next year?

I think the answer is no, it doesn't make any statements about outsource payroll.

There is no new news versus what we have been talking about, Jim, in the past.

With respect to the range of -- with the range the fact of the matter is the wider the range the more you go to the top.

We decided to keep it narrower because as we get bigger, 3% range is 60 or $70 million.

The wall of large numbers starts to help us narrow the range.

We feel pretty good about the numbers and the wild card again is in our big business and how fast does the category grow.

We're going to do everything we can to grow faster by the way.

Any other part was you have predicted the payroll and payments to slow down next year?

Any thoughts around that?

The better we execute, the faster they will grow.

I think we still have some businesses in there like the outsourced payroll business that's not growing as fast, and but at the end of the day, 12 to 16% growth in this segment now which is over $500 million is pretty solid growth.

It is recurring revenue.

There are businesses that we love to be in, and we're working hard to continue to grow them faster.

And, Jim, we benefited in '06 from a price increase we took in our payroll business in '05 which annualized and in the ramp of new payroll offerings.

Those were better '05 to '06.

Thanks.

Our next question comes from [Scott Neuberger].

Congratulations on a great year.

Thanks, Scott.

You're welcome.

On CapEx, sounds like the guidance for next year is about 60, 70% higher than this year.

Can you talk about that, please?

Yes.

Scott, it is mainly related to leasehold improvements as we expand facilities in a couple of our locations where we simply run out of room as the business grows and we add to the talent pool of the company.

Okay.

So employees and facilities.

Can you be more specific on what business units those are supporting?

New facility in San Diego for Consumer Tax.

Thanks.

Also, we talked a little bit about some of the components of your margins, cost component.

Could you talk a little bit about sales and marketing directionally?

Are you saying you're doing it better just as a percentage of spend?

Is that going to be going up or any color you can add there?

Thanks.

I think what we clearly want to do is grow R&D faster than the average.

We want to grow G&A on the other end of that spectrum as well as our investment in systems and infrastructure.

Since we've bitten off the big chunks and done the 11-I upgrade and with SOX and everything we made a lot of investments we're now going to get volume leverage on.

I put marketing in the middle, that we believe we have a lot of opportunity to be more efficient on our spend.

At the same time in a lot of new things we're doing we are getting a good return on the money we're spending, so in taking a zero based mind set about this, what we want to do is be more efficient, in addition, as we prove that efficiency I think you see our returns go up, and we may spend more.

I think we are getting pretty good indices or indicators on the return we're getting from marketing spend.

I think we still have a lot of the way we used to do it that we need to modernize.

First let's clean out the closet and not zero base our spend and at the same time -- this may be a repositioning year where we're relatively flat as a percentage of sales, and it could go up because we're seeing some good returns for some of the new marketing programs we've invested in.

What would you, Bob or Kiran, would you add anything to that?

That's right.

Once side going down G&A and infrastructure.

One side clearly going up which is R&D and marketing probably in the middle which is the easiest one for us to pull to.

The other two are a lot of investments in people, but this one is really a lot of investment in programs, so we have more flexibility in the marketing spend based on what we're learning as we go through the season.

Great, thanks very much.

Our next question comes from Brent Thill of Citigroup.

Thanks.

Good afternoon.

The guidance you're assuming for next year is modest margin improvement off of 28%.

Can you talk about some of the levers in the model where you're seeing improvements in efficiency and how we should still think about long-term margins for the Company?

I will start with the second answer first.

As we still see a 3 in front of op margins.

We're not solving for that.

Because of the volume leverage in our business models, every year we seem to generate operating profit leverage as long as we grow, and we grow units, so the number one driver of the margin improvement as it has been is volume leverage.

Our high fixed costs low variable cost businesses as we continue to get better at acquiring new customers and selling more units, we have nice economics and profit leverage from that.

The other stuff is the same stuff I mentioned earlier.

We work price.

We work mix, and we manage expenses more tightly, so I would argue over 50% of the improvement is volume leverage, and so it is the same four things we work every year, and though we're not solving for, it I do expect we have a 3 in front of it the next few years.

Okay.

If you can just talk a little bit about the vertical strategy, some of the biggest opportunities you're seeing over the next year beyond healthcare that you're working on.

I think I would focus investors on small business tax which is both Consumer and Pro.

We talked -- we'll talk at investor day a little about healthcare which is could be potentially the third leg of the stool although we don't expect any material revenue from that next year.

I think those are the businesses I'd focus investors attention on.

They make up the biggest growth opportunity that fueled our growth and I think all the other stuff is doing fine but isn't going to power the growth of the company in total.

Thanks.

Our next question comes from Daniel Cummins of Banc of America Securities.

Thank you.

Could you tell us of the 600,000 new users added in QuickBooks this year, proportionally can you give us some idea how many came on the premier and enterprise edition?

Is it similar proportions to unit growth or is it vastly different?

Is it changing year-over-year, and with respect to the product road map that we'll hear more about here in the fall, do you expect to again be vastly skewed towards enterprise and less so at simple start and even the online edition?

Absolutely not.

We think there is huge growth opportunities in the entry level.

We think there is huge growth opportunities with QuickBooks Enterprise, we still think there is big growth opportunities in what we call Main Street which is QuickBooks Pro and Premier.

We have aggressive plans to expand our penetration in the category in all three of those areas, and we've had great success over the last three years and all of those categories, so we don't break out new users for each one of those.

We get new users in all the categories and a lot of the higher end stuff is upgrades, but we do get new users from Enterprise, Premier, Pro, not just Simple Start, but we don't split the details out to that level, Daniel.

Any reason why -- anything you could point to why the online edition subscriptions dipped this quarter?

If that is, it is a surprise to me.

Last time I looked, we had grown 100% in the last year and almost 80 plus thousand subscribers.

I don't know where you got that.

Is the fact sheet wrong?

We don't have a separate line for OE , do we?

Do we?

It is 6,000 subscriptions.

It is the lowest it has been for a couple of quarters.

Just curious.

Don't know.

It is probably $5 million of revenue out of $2.3 billion.

Okay.

Thank you.

Our next question comes from Philip Rueppel of Wachovia Securities.

Thank you and good afternoon.

A couple questions around Consumer Tax, the commentary seems to suggest that '07 will be much like '06.

Is there anything on a macro level?

I know going into '06 we knew there would be likely changes to the FFA.

Is there anything along those lines that could affect '07 positively or negatively and secondly, sort of the web growth as you had mentioned was one of the key reasons for upside.

Is there any reason to think that the differential growth or that we won't still see the same kind of growth rates on the online side as we move into '07?

A couple quick thoughts.

I think two thoughtful questions.

The fact is the tax prep 135 million unit market grows about 1% a year.

Desktop software is gaining share of that 135 million unit market.

I think the important thing for investors to understand that more people are choosing to do their taxes using self prep boxed software or CD than other methods.

It is just that the web is growing much faster than even the desktop.

I think that's an important thing.

There is a common misperception that everybody is migrating from a desktop product to a web.

A desktop product is still gaining share of the 135 million tax prep market.

Look, we would have never in terms of growth rates, we would have never predicted -- last year boxed software grew slower than we thought and the web grew way faster.

It is hard for me -- I think the web will still grow faster for the rest of my life, but it is hard to predict that the growth could be what it was last year.

I hope it is, but it is hard to predict at this point, Philip.

It sounds like it would then be safe to say that from a product positioning and marketing perspective you're still going to be aggressively pushing the desktop position because there is still growth potential there?

They're both great businesses, so they're both great businesses.

We love the desktop business.

Frankly our strategy is to target self prep people and however they want to do their taxes using the desktop product or the web product is fine with us.

They're both great businesses.

Your other question about are there anything going on in a macro level, as we talk about frequently the only high level question is, you know, I don't see any big change in FFA.

We signed a full-year extension a year ago.

It is a political year.

It is an election year.

There will always be a lot of noise in Washington.

I think that's the only uncertainty, but I don't expect anything to change for this season in terms of high level things that could impact the category growth.

Great.

Thanks very much.

Our next question comes from Glenn Greene of ThinkEquity Partners.

Thanks.

Good afternoon, guys.

Hey, Glenn.

Just a couple questions also on the tax side.

I was wondering sort of at a high level if you could talk betted retention you saw this year and whether that was a contributing factor to the unit growth or what order or magnitude?

I thought we were up like 3 points weren't we year-over-year?

It wasn't?

Okay.

Last year's data, then.

I don't have the numbers off the top of my head.

We'll need to do that at investor day.

We'll get you that data at about a month in investor day.

It sounds like from the way they're looking at me it was not up year-over-year.

Really?

Okay.

That could create an opportunity for us.

Interesting.

The 10 to 15% revenue growth, should we assume kind of similar to this past year that really that's going to be driven almost entirely volume growth?

You got probably 3 points from mix.

You're thinking about any pricing leverage?

I think that I would go into the season saying that unit growth is the focus in this business and for us it is all about growing units.

TurboTax over serves customer that use -- over serves customers at the low end of the functionality spectrum and under serves -- sorry, we price it too high for people that don't use much of the functionality, and we price it way too low for people that use all the functionality, so that's something that we're working on figuring out.

Okay.

Finally, and obviously it is early, but you kind of alluded to healthcare and certainly not going to be meaningful for '07, but just give us a progress report there and is this a 2008 type-thing we should be looking for that will be meaningful?

Stay tuned for investor day and we will stairs what we're thinking about.

I think that this is still in a state of flux for us as it is an investment we're making, and the big thing is we still have to prove we can solve an important problem well, and so we have a new product coming to market that we think will do that, but we got to get it right, and so it is too early to speculate on that until we get a product in the market.

We are investing time and I said I am investing a bunch of my energy on this because I do think it has a big opportunity.

We still have to prove that we can solve an important customer problem well and get paid for it.

Since it is a new market, there is some uncertainty there.

You will hear more about our strategy on September 20th.

No matter what we do, it won't be material to our '07 financial results.

Okay.

Thank you.

Our final question comes from Vick Churamani of Lehman Brothers.

Good afternoon and a good year.

Start to go get a better sense on the mix for QuickBooks.

Can you provide some color as to what's the mix was for this year for the higher priced products and what would be your assumption going into fiscal '07 as to how many that would change?

I think the best data that we could give you is stuff in the fact sheet and you can look at it, we give it to you over the last two or three years.

You can look at the patterns, and apply your wisdom and insight to project where the lines are going, but at a macro level we'd expect we continue to acquire new users in all of the products and that we continue to see more migration up the line as we continue to make the products better, and so you see those trends and again the reason it is hard for me to give you I number, the better we do, the more users we acquire and the more we move up the line.

Mix is the output of those two things.

We make money on a Simple Start customer.

The more customers we get, the better off we are.

Thank you.

Gentlemen, I am not showing any further questions.

Would you like to proceed with any further remarks?

I just thank everybody for their questions and for your support.

We came off the best year we've had since I have been the CEO last year.

We're very excited about the coming year.

Our big wild card as you talked about is how fast can we work -- how fast does the category grow and the better we do, the better we execute, the faster the categories will grow.

I like our competitive position, and I like the progress we're making on execution, but there is some uncertainty.

We feel confident about the guidance we provided, and we feel even more confident about our capabilities as we go into these years.

Thanks for your support and we'll see many of you at Investor Day on September 20th.

Good bye.

Ladies and gentlemen, thank you for participating in today's conference call.

This concludes the call.

Everyone have a great day.