直覺電腦 (INTU) 2007 Q2 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 second quarter 2007 conference call. [OPERATOR INSTRUCTIONS]

With that, I'll now turn the call over to Bob Lawson, Intuit's Vice President of Investor Relations and Financial Planning and Analysis. Mr. Lawson?

Good afternoon, everyone. Welcome to the Intuit second quarter 2007 conference call. I'm here with Steve Bennett, Intuit's President and CEO, Kiran Patel, our CFO, and Scott Cook, our Founder.

Before we get started, I'd like to remind everyone that our remarks will include forward-looking statements. There are a number of factors that could cause Intuit's results to differ materially from our expectations. You can read more about these risks in the press release we issued earlier this afternoon. Our form 10-K for fiscal 2006, and our other SEC filings. All of those documents are available on the investor relations page of Intuit's web site at intuit.com. We assume no obligation to update any forward-looking statement.

Some of the numbers in this presentation will be presented on a non-GAAP basis. The most directly comparable GAAP financial measures in 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 web site.

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

Thanks, Bob. And thanks, to everyone, for joining us today.

As you read in our press release, Intuit delivered another solid quarter with revenue and non-GAAP EPS above the high end of our guidance range. We had strong double digit growth in Consumer Tax and the Payroll and Payment segments, partly offset by revenue shifts in QuickBooks and ProTax. As you may recall, the earlier launch of QuickBooks and changes in our ProTax offerings cost about $45 million of revenue to shift out of the second quarter and into the first and third quarters compared to prior years. We're pleased with the first half results with year-to-date revenue up 8% and our deferred revenue balance at the end of the quarter of $295 million was up 15% versus last year. We feel good about the total year and are looking forward to the third quarter.

With that I'll turn the call over to Kiran to walk us through the financial details.

Thanks, Steve. Let me start with a summary of the second quarter's results. Revenue of $763 million was up 3% year-over-year, non-GAAP earnings were $0.45 per share, $0.03 above the high end of our guidance. On a year-over-year basis, non-GAAP EPS was down 6%. On a GAAP basis, we earned $0.40 per share. EPS benefited by $0.01 per share from the retroactive renewal of the Federal R&D Tax Credit.

As you know, the seasonality of our business makes it difficult to assess quarterly results. The earlier QuickBooks launch and [forms delays] and ProTax moved more than $45 million of revenue of Q2 into other quarters. And although revenue moved out of the quarter our expenses are relatively fixed, resulting in lower operating income and EPS in the quarter than in the second quarter last year. Second quarter operating expenses grew 9% year-over-year. That's in line with our guidance and historical growth rates.

Now let me turn to business segment results. Second quarter Consumer Tax revenues of $226 million was up 18% over the year-ago period. Partly as a result of higher sell-in to the retail channel to support merchandising and promotional activities. Today we released the first of our first three tax unit sale updates through February 17th, TurboTax Federal units were up 1% on a season to date basis.

As we discussed at Investor Day, we've expanded our offerings at both the high and low end, including testing kit Free Edition in the market this year designed for new users with simple returns. We have seen the free product attract customers we weren't previously serving, so we expect to increase testing and availability through the rest of the season.

QuickBooks had a solid quarter with revenues of $164 million. Recall we launched QuickBooks earlier this year than last, which shifted about $20 million of revenue from the second quarter to the first quarter. On a year-to-date basis, QuickBooks revenue is up 5%.

We had excellent growth in our Payroll and Payments business with revenues of $138 million, up 15% year-over-year. Payments revenue growth was driven by 25% growth in customers and 11% growth in transaction volume for customer. In our Payroll business we are pleased with the fact that for the first time ever we crossed over the 1 million customer mark, which we believe is far larger than any other third-party payroll provider.

ProTax was in line with guidance with revenue of $131 million, reflecting the increase in deferred revenue, which we expect to recognize in the third quarter. Our other businesses segment revenue of $105 million was up 1%.

Moving to the balance sheet, Intuit ended the second quarter with $1.1 billion in cash and investments, capital expenditures were $24 million during the second quarter. We used $205 million to repurchase 6.7 million shares of Intuit stock during the quarter. We have $301 million remaining in the current repurchase program.

The previously announced acquisition of Digital Insight closed on February 6th, at which time Digital Insight became a wholly owned subsidiary of Intuit. The business, combined with our existing financial institutions group, will become a new segment beginning in the third quarter of fiscal 2007. To finance this acquisition, we obtained a $1 billion in bridge financing, subject to market conditions, we expect to replace the bridge financing with longer-term nonconvertible debt in the third quarter.

We also announced in a press release earlier today, the expected sale of certain assets of our Premiere and Complete Payroll businesses to ADP for up to $135 million in cash. The sale price is contingent on the number of customers that transition to ADP, among other factors. The sale will allow us to focus on our core, Do It Yourself and Self-directed with Assistance customers, while transitioning our, Can't Be Bothered customers to a highly regarded outsourced payroll provider. We expect the transaction to close in the third quarter. The sale will not be treated as a discontinued operation, so it will impact 2007 results, but we expect it will accelerate our Payroll growth going forward. Revenue for our QuickBooks Payroll offerings has grown at a compound annual growth rate of 17% over the last three years.

Moving to the fiscal 2007 guidance, the outlook for our existing businesses is unchanged. Changes to the guidance are the result of three one-time items. First, as expected, Digital Insight will add 120 to $125 million of revenue and be $0.03 non-GAAP EPS dilutive for the year compared to the previous guidance. The disposition of our fully outsourced Payroll business will reduce revenue by about 21 to $23 million and non-GAAP EPS by $0.03 versus prior guidance. The retroactive renewal of the R&D tax credit will increase non-GAAP EPS by $0.03 versus previous guidance.

Therefore, the fiscal 2007 guidance is now, revenue of 2.625 to $2.675 billion, which is an annual growth about 12 to 14%. Non-GAAP diluted EPS guidance of $1.33 from $1.37, which is an annual growth of 10 to 13%. GAAP diluted EPS of $1.10 to $1.14, inclusive of the amortization of intangible assets associated with the acquisition of Digital Insight.

Segment guidance is unchanged, with the exception of Payroll and Payments, which is impacted by the transaction with ADP, and financial institutions which is a new segment for the quarter. Guidance details are available on our fact sheet at www.Intuit.com.

We're also providing guidance for our fiscal third and fourth quarters. For our fiscal third quarter, which ends April 30th, 2007, we expect the following: Revenue of $1,102,000,000 to $1,132,000,000, a year-over-year growth of 16% to 19%. Non-GAAP operating income of 572 to $599 million. GAAP operating income of 527 to $554 million. Non-GAAP diluted EPS of $1.05 to $1.09. GAAP diluted EPS of $0.94 to $0.98. For the fiscal fourth quarter we expect revenue of 405 to $418 million, a year-over-year growth of 18 to 22%. Non-GAAP EPS of negative $0.07 to negative $0.05 and GAAP EPS of negative $0.12 to negative $0.10.

With that, I'll turn the call back over to Steve.

Thanks, Kiran. Before we get to your questions, I'd like to provide some longer-term perspective. We've demonstrated that when we grow revenue, good things happen. Strong cash flow, operating income and earnings per share growth. So the question we always get from investors is how will you continue to grow? Well, I've never felt better about our long-term growth potential and here's why.

We continue to execute on our growth strategy of being in good businesses that have large unmet or underserved needs that is we can solve well. We apply customer-driven innovation to deliver right-for-me solutions that create customer delights because they're easier and a better value. We apply this rigorous methodology to continually improve our existing offerings as well as create new offering that solve additional important customer paying points.

We've been executing this same recipe for success over the last five years, and we continue to get better at it as we move up or down the learning-- the experience curve. We constantly assess our business to insure they fit our growth strategy and the moves we have announced today are 100% aligned with that strategy. The acquisition of Digital Insight and the sale of certain of our outsource Payroll assets reflect rigor and insuring we're focused on businesses where we can build a durable advantage and a portfolio that can deliver long-term double digit revenue growth with profit leverage.

We've had two strong growth engines, small business and Consumer Tax for years. But now we have a third growth engine with the acquisition of Digital Insight and the creation of our financial institution segment. We also have a potential growth engine in healthcare. If we are successful solving those important problems well. We did an initial read following the expected launch of our new healthcare [v1] offering sometime this coming summer.

In small business, we're particularly pleased with the growth we are seeing in the Payroll and Payment segment and the early results of our focus on the 22 million small and simple businesses. The group today was by far the highest degree of nonconsumption.

Our newer offerings such as Premiere Flavors, Enterprise, POS and Online Edition are all growing nicely. Consumer Tax is off to a solid start. And we believe we're well positioned for another great year. Over the last five years, the number of individual federal returns prepared using self-prep software has been growing at a compound annual rate of 10% per year. More than five times faster than tax stores and the overall category. The demographics of new filers entering the market favors self-prep software because it has the highest net promoter score and we believe the best value versus other methods. And we keep working hard to widen the gap and make it easier for customers who want to do their own taxes.

The creation of our Financial Institution segment gives us a third exciting platform for growth. DI was growing revenue at double digit rates before the acquisition, and as we combine Intuit leading consumer and small business applications, and our proven skill of ease of use and customer-driven innovation, with Digital Insight's industry-leading online banking platform and strong distribution capability, we think we can accelerate that growth rate. We've been working together for nearly a year on a new small business online banking offering which we expect to launch this summer. We believe it will raise the bar and begin the development of version 2.0 next generation online banking solutions.

That's why it feels so great about this year, and the years ahead. Thanks to all of you for your support and to all the Intuit employee that stay so focused on delivering for our customers.

Now, let's get to your questions.

Thank you. [OPERATOR INSTRUCTIONS] Our first question comes from Heather Bellini of UBS.

Hi, thank you. Good afternoon, Steve and Kiran. I was just wondering if you could talk a little bit about your Consumer Tax business this quarter. You guys had a really tough comp, if I recall. And to see that business up as much as it is, given the fact that I think last year at this time you had about, if I'm not mistaken, $40 million flow into the January quarter because of the change in the rebating, what do you think was driving that this quarter? And if you could shed any light in terms of how some of the new offerings are being accepted into the market. Thanks.

Well, the, Heather, the gap between such strong performance in revenue was driven primarily by strong retail buy-in for some merchandising and promotional efforts, all of which on the desktop software side. We still continue to see the filing patterns extend, and this year, total units are what, plus one versus at the same time last year we were plus five. So I think that we feel that the season is playing out pretty much the trend I've seen the last eight seasons. And with all the puts and takes between quarters. There's nothing specific about, we also had some price increases in retail which increased the revenue on a year-over-year basis. But those are really the two big drivers on why revenue was up 18 and units in total were only up 1. I think you'll see us be aggressive on the web going forward, and we still feel comfortable about the guidance we've given for Consumer Tax and I think it will be another good season.

Steve, can I just ask a follow-up then? In regards to your outlook, you guys have been talking about how unit growth and revenue growth should, pretty much equal each other. But over the last few years, that hasn't been the case, your revenue growth has been outpacing unit growth by a pretty nice margin. What would cause that to change this year?

I think it's hard to predict, there are so many moving parts, Heather. I think at this point on the desktop units, we clearly are going to grow revenue faster than units. On the web, we'll still have to see. We're going to have to, as Kiran mentioned, we're going to experiment with some-- more aggressively with a free federal offering where we charge per state add-on services, because we think that might help us expand the category and serve customers that we haven't served as well up to this point. So I think the desktop products we clearly had more revenue than units. We'll have to see how the web all comes down. That's why I say, when you put it all together for the whole season, units and revenue we still feel comfortable in the 10 to 15% growth range.

Okay, great. Thank you.

Our next question comes from Laura Lederman of William Blair.

Yes. Good afternoon. Just a few questions. Can you talk about the integration so far of Digital Insight at this early days? But, how are things going versus a plan, any thoughts as to what type of turnover there has been if there has been any? And then I'll have another follow-up. Thank you.

Sure. Laura, to be honest, I don't know how it, Jeff Stiefler, who runs that business for us this morning. I don't know how it could be going any earlier at the risk of sounding too bullish. I think we are already talking about, and have candidates for Intuit to move into help on customer-driven innovation. Jeff and I talked about a candidate. We've talked about marketing, a couple of marketing candidates to move into DI. We have, they're up on our network, that all happened the first weekend. I'm not aware that we've lost anybody so far based on the acquisition.

I think the advantage we had is, the teams kind of dated for a year in a partnership and we decided we liked each other. I was down at a session that with the top 70 or 80 people at Digital Insight last week. And I would just tell you the people are still very positive and bullish. And so we feel great about the acquisition and we feel great about next-generation online banking. So no news here other than we expect continued strong performance from that business now that it's part of Intuit.

Back to the point of the tax [sell-in] at retail leading to the difference between units and dollar increase. Can you talk a little bit about the promotions? Are they different than in years past? In other words, does that give you an edge up versus other companies in terms of the tax software? I haven't been out to a lot of the stores to see the promotions, but can you talk a little bit about what's going on from the promotional standpoint?

A couple thoughts. The two factors were, higher price in retail, because clearly we raised the price and that would have given us some lift versus unit growth. And the second was buying-in for supporting merchandising programs. I think the thing that's always hard for us to know is whether it's pulling demand in from the future or whether it's creating and expanding demand. I mean, so far, in the data that we show at retail, our shares are relatively flat in total. So some of that may just be timing would be my guess. So that we know the price leverage at retail is real. And some of it on the unit growth may be more timing. We'll just have to wait and see. We'll have a better view of this when we release the next set of results in March.

Thanks so much.

Our next question comes from Adam Holt of JPMorgan.

Good afternoon. My first question is about the QuickBooks business. I was wondering, if you look at the business year-to-date, you're looking at about 5% growth. You've got a pretty tough comp in the third quarter. But you seem to be comfortable that we're still going to get to kind of double-digit growth at the midpoint of your guidance. Can you talk a little bit about what gives you comfort with the acceleration in the back half of the year for QuickBooks? And maybe as a second question, are some of the newer services and relationships like Google starting to ramp more quickly?

Adam, a couple quick thoughts. Actually, the comparison in the third quarter last year is an easier compare than it was last year at this point in time. So we actually have, one of the reasons why we're quite confident is the year-over-year compare is easier. The second is, as you may have heard, as we've done the last few years in Consumer Tax, we've launched some advertising for QuickBooks, which is been giving us a nice lift in units. So it's really a combination of those two things, better compares, easier compares, and then the lift we're getting-- we're seeing from advertising that makes us feel comfortable with QuickBooks, and we feel like we'll be right solid in the range that we gave at the beginning of the year on QuickBooks, and Google's stuff, we're gaining some momentum, but I would tell you it's still early and we haven't seen a huge lift on that yet. But I think we're making progress and learning every day. And we're quite excited about the longer-term opportunity for that.

If I could turn for a minute to ProTax, you mentioned up front there were about $45 million of kind of one-time revenue impact in the quarter . Were any of those related to the ProTax line in the quarter, were there any change in seasonality around that business that you're starting to see?

No it's really just the form's availability. And that's why it's in our deferred revenue, so the deferred revenue balance that went up 15% is revenue that's already booked. It just will flow through in the third quarter. And so, sometimes this happens at the end of January 31st, you don't get all the forms in so you can sell the product and book all the revenue, but we know it's coming. So it's just timing.

Terrific. And just one last question if I could, on the Digital Insight side. CheckFree just announced the acquisition of Corillian was wondering if maybe you could comment on what you think that does to the relationship with CheckFree and Digital Insight, if anything?

Yes, I don't think it has any impact. Because, the CheckFree is a partner of Digital Insight for the bill payback in service that partnered with both Metavante and CheckFree. And so I don't see any direct impact on that. We'll have would see how that evolves.

Terrific, thanks very much.

Thanks, Adam.

Our next question comes from Brent Thill of Citigroup.

Thanks, Steve just on the Consumer Tax side, I think this year, year-to-date, you're already up 20%, your guidance for the year is implying 10 to 15% growth. And I think you've alluded to you expect the tax season to be more back-end loaded in Q3. So, I guess, the dynamics that you're seeing for why you think that would decelerate through the year?

I think it's-- I mean, I guess it's a tricky question about this quarter when we look at it. It has to do with the nature of the retail sell-in and the price we got early in retail, which overstates potentially the revenue growth based on relative to units. So, I mean, look at units are up 1 and revenue is up 20%. That would tell you that there's a mismatch in timing. So as we look forward, there's always some uncertainty at this time of the year. At the end of the day, it's going to be how strong our units, and really how strong our web units, and at this time of year it's really hard to call the total season and that's why we have a mismatch in timing at this point.

And Brent, just a small point, it's up 18%.

Year-to-date at that point. It's up 18 in the quarter but year-to-date 20. So, no, the math is right, it's just a question of mismatch on timing. And with only 1% unit growth so far, remember last year, we had 5% unit growth at this time and we ended up with over 20%. So it's just sometimes hard to predict the curve and how it's going to come in at the web.

What we know for sure, and I think this is the big message for all investors, we know for sure there's going to be 135 million give or take Federal 1040s filed. We have seen and shared with you the fact pattern for the last six or seven years on what percentage of those 135 million are going to be filed using self-prep software. And every year we've been gaining, self-prep software's been gaining a part of that 135. And so that's the first question. The second question is what happens to our share of that self-prep software. Those are really the two questions that you have to think about and evaluate the whole market.

But that's why timing for us is less, we're learn concerned about other than how the whole season comes down, what percentage of the 135 does self-prep software get and then what percentage of that do we get? So far we're feeling pretty good about what we're seeing. But there's still a long way to go in the season.

And just a quick follow-up. I know you've been reluctant to share your secrets in the health care market, but, as you alluded to, this summer we'll see the first release. Can you give us just a sense of kind of where the first spot you're headed with it? And I guess we'll wait for more of the secrets later in the year.

I think you're going to have to wait for more of the secrets even today. This story hasn't changed. It's really focusing on helping consumers manage the financial aspects of their health care challenges, given the fact that more and more are being asked to manage things that are more complicated disputes and HSAs and FSAs. So, there's a lot of customer pain out there, and that's what we're focused on us. A version one fashion starting to solve when we launch our first product expected to be this summer. So as we get closer, we'll share more of the details, but it's still too early to let the cat out of the bag.

Thanks.

Thank you. Our next question is comes from Philip Rueppel of Wachovia Securities.

Great. Thanks and good afternoon. A couple more questions on Consumer Tax. First of all, the impact to the FFA, has that been about as anticipated, or is there anything unusual there? Second of all, you had mentioned refund cards, I know it's early in the whole filing process, but is any qualitative thoughts around whether that's working better, worse than last year? And then finally, you mentioned on retail, sort of your share perspective on the retail side, how about your view of sort of how your market share gains or losses from sort of the government's e-file data, how is that going?

On the Free File Alliance front, I think we announced today we were up, how much, 7%? 7% year-over-year. So we feel good about how we've participated in partnership with the IRS and the Free File to come up with a consumer free zone in the Free File Alliance. So I think that's playing out, Philip, pretty much as we expected. With respect to refund bonus, I actually haven't even seen any. I just think it's not material in terms of the total scope of things.

Right.

And the share of the web, the answer is hard for us about that is it's really hard, they don't separate web versus desktop. So you've got to really back into a bunch of numbers and do a bunch of assumptions and estimates, that I'd be nervous to share any data with you about because I couldn't prove any of it. So I think at the end of the year, I think we just keep going in how we're doing in units and we'll get the data from the IRS and see how it all plays out.

Okay. And so, it's kind of implicit in your revenue guidance is consistent share slight share gains?

I wouldn't want to comment on that. I think the answer is at the end of the year, we're saying 10 to 15% revenue growth.

Okay.

And over the last six years, the category has grown 10, but we, as Heather mentioned earlier, on retail, we have gotten some price this year. So I think the best guideline is still revenue and price-- our revenue and units will grow about the same. But that's a combination of a lot of moving parts that all adds up to that. Clearly, on the retail side, we've raised price and we're going to get more revenue per unit and maybe on the web we're going to be a little bit more aggressive and might have a little bit less revenue per unit that all yields out to be revenue and units about the same. We'll have to see.

Okay, great. Thanks, that's it for me.

Thank you.

Our next question comes from Bryan Keane of Prudential.

Hi, good afternoon. Online tax is up about 50% paid at this time last year. This year, if I'm looking at the numbers right, it's up only 4%. Is that a concern for you guys that dropoff from 50% last year?

Say again, Bryan?

I think paid online tax was up about 50% at this point last year. Now it looks like, if I'm reading the data right, it's up about 4%. Is that a concern that dropoff from 50 to 4? Or is there something in the 50% that boosted that number that you tend to get back later in the year that you're planning on this year?

Bryan, it's Bob Lawson. We didn't expect the kind of wild web growth that we saw early in the season last year when we were up so much at this stage. I'd also keep in mind it's still early days for the web, or for the retail season we're still pretty early on in the web, and we're about where we expect it to be overall.

Okay. Any idea how you guys are doing in terms of market share gains or losses? I guess both on the desktop and the web so far year-to-date?

Retail, the data we show, sees that in total it's relatively flat. And we've been competing against pretty aggressive competitors using price very, very aggressively and we still seem to be holding our own. Maybe if they've gone down to pretty low prices I think we may have lost a couple points a share in the last couple weeks. But in total for the season, we think we're relatively flat. On the web, it's just too early to tell and all the stuff going on. There's a lot have moving parts. I would tell you, I don't expect web units to grow 57% this year. And that's why we still feel comfortable with 10 to 15% growth for revenue for our Consumer Tax.

Okay. And then just switching over to QuickBooks. I'm having a little bit of trouble getting onto the web site. Units for quick-- I know year-to-date, QuickBooks revenue is up 5%. Can you just give us a sense of how units are doing in the three or so categories that you guys have year-to-date?

Yes. Let me-- in aggregate on a year-to-date basis, QuickBooks, the software unit are essentially flat with the same period last year. With a good mix shift up to Premiere, Premiere units are up 26%. And the, aggregate is flat.

Okay. And the mix shift is the reason why you'll get that higher-- the revenues up 5 and the units is flat?

I think we're doing well on a bunch of the low-end stuff and we're doing well on the high-end stuff. So, but Pro's not doing as well on a year-over-year basis. So I think, as always, the line is now it's becoming more mature, it's becoming more right-for-me and consumers are picking the thing that's right for them which tends to be more bifurcated than what we used to have a few years ago when we had more one size fits all offerings.

And then just finally, Kiran, the stock-based comp, what's that number for the fiscal year '07 I guess implied in the guidance.

It's just running at about $19 million a quarter for the first two quarters. I would expect that to about be the trend for the balance. Balance of the year. So between 75 and $80 million.

Okay. Thanks a lot for the help.

Thanks, Bryan.

Our next question comes from Jim MacDonald of First Analysis.

Good afternoon, guys.

Hi, Jim.

On Payroll you said you're divesting substantially or all the complete and business and premiere, is that-- is there some piece you're keeping? I'm a little bit confused with that.

Yes. We are selling customers, a customer base, and salesforce and a couple facilities. But there are some people that were using those offerings that we believe our are self-directed that we're going to keep and try and convert into our assisted product.

Essentially all the assets of CBS and the Premiere business are going over to ADP?

Yes. Essentially, except some of the customers are staying.

Okay.

Yes. But essentially I think that's accurate. I thinks that's the simple way to say it. But it's not precise, but it's accurate.

Okay. And then switching to low end QuickBooks, you just mentioned that Pro is doing well but the real low end-- Pro is not doing well but the real low end is apparently doing well, can you talk a little bit more about that and why that is happening? Because the low end in general seems to have tailed off a bit this year.

I think it's still early. I mean, we're in the middle of the season and I think we, we think that Simple Start is aggressively growing to help people convert nonconsumption. We've been much more aggressive at promoting Simple Start, targeted at the 22 million home in my business customers, try to convert them from nonconsumption to buy our product. And Simple Start is getting rave reviews. So we're gaining momentum on that, QuickBooks online continues to grow. So we think the way we continue to grow QuickBooks is to grow the category and expand the category, and that's what we're doing, and then sell a full range of solutions that help customers migrate up and we're seeing continued growth in POS, enterprise and the premiere flavors.

So, our strategy is working as we planned. Let's see how the numbers come out at the end of the third quarter. We feel good, another good solid season in QuickBooks, it won't be a blowout season like we've seen the last two years, but it's still going to be another good, solid season.

Just one quick follow-up. You're not worried about cannibalization of your free product and Microsoft's free product?

We obviously keep a very close eye on that, and what we see is that we're both targeting the same customers, the 22 million folks with nonconsumption. We feel that Simple Start, which we've had a free edition of Simple Start for a while competes very, very well against everybody and that's why it's doing well. So we, we expect to continue to use Simple Start as our low end platform to help us expand the category and compete with whoever we're seeing in the low end.

Thanks.

Our next question comes from Scott Schneeberger of CIBC World Markets. I'm sorry if I mispronounced your name.

That's fine, it's John for Scott. Good afternoon, guys. Just wanted to first ask you about QuickBooks in the TV advertising. This is I think the first year for that. How effective do you think it has been this year? I think you mentioned during the call that did have an impact overall advertising. But specifically, how did TV impact results? And then I just have a quick follow-up.

Yes. We don't share the specific list that we see in the test markets. But we've been doing this for four or five years in Consumer Tax with pretty rigorous methodology, where we test, and then every year we found the returns and we've taken the spending up. This is just the first year we ever done that. It's TV, it's radio, it's a comprehensive. So far it's giving good results, and we're pleased with the returns. So we'll get a lot of learning this season and figure out how to factor that into what we do next year. But it's giving us a lift. But I'd rather not say at this point what that specific lift is.

Great. And then just one quick follow-up. Can you give us an idea of which week the update for the March tax turbo--TurboTax unit data will be reported? Which week in March?

We haven't made that decision yet.

You haven't made a decision yet. Okay. Thank you very much.

We think it's about March 20th, right? It's about a month from now is what we're guessing. I guess, 15th to 20th. When do we think we'll know?

We'll make a decision in the next couple of weeks.

Great. Thank you very much.

Our next question comes from Glenn Greene of ThinkEquity Partners.

Thank you, good afternoon, guys.

Hi, Glenn.

I guess the first question, I wanted to go back to the Consumer Tax and the retail buy-in. I was wondering if there was a way for to you quantify what the incremental impact was, I mean, did you get 15 to $20 million revenue due to the buy-in this quarter, any way to quantify that or think about that?

That's why you get the big bucks, Glenn. You get to figure that stuff out on your own.

That's dangerous, though.

For both of us. But, two big factors, price is a part and the buy-in was a part. And units are up 1 and revenue is up 18. And can you allocate between those two things. And that would actually explain the difference between units and revenue.

Okay. That's helpful. And just quickly, Payroll business looks like it's a 45 to $50 million business that's been sold, roughly revenue run rate.

On an annualized basis, yes, for the 6 months it 21 to $22 million impact.

Okay. And Digital Insight, I think you said 120 to 125 million, assuming that looks, not a big deal, but it looks somewhat conservative, given their trajectory and run rate and growth profile. Are you just being cautious there?

No. I think the thing that everybody asks, we'll have to do a good job of messaging to the investors is, Digital Insight signs four-year contracts on average that renew 25% each year. It's 93% recurring revenue all software to service, all the kind of characteristics we like. There are no huge jumps that are going to happen in the short term. It's a subscription business, four-year contracts. There's no big license fee arrangements. So, when Digital Insight signs the new customer, you start to get-- it's like Payroll Or Payments, it's a recurring revenue. So, I think you see us try and accelerate the rate of the curve, but there will be no hockey stick quick big bump-ups. So, we'll share the key drivers there with investors in the next quarter [expense] sheet so that we can be as transparent as we can on what drives revenue in that business.

Thank you.

Our final question comes from Daniel Cummins of Banc Of America.

Thanks. Couple questions. Is that a GAAP or non-GAAP revenue convention for the Digital Insight contribution, Kiran? It's GAAP, right?

It's GAAP.

There's no--

It's the same for GAAP or non-GAAP.

There's no deferred break down. Okay. And I guess, CIBC question was a good one on the advertising. My sense has been, I'm hearing a lot of your national advertising, TV and radio, around QuickBooks online. And it did jump this quarter. What's, I guess, could you, is there a possibility, is there a strong possibility that you'll double down this national advertising spending even in the current, within the current season?

No.

Okay. And then last question I had, you've been piloting with some free offers for TurboTax online, I believe. What contribution has that made to the plus 1%?

I think we have typed some-- dabbled in some stuff and minimal. Basically no. And I think as the season evolves you'll see us be a bit more aggressive on that. We've got enough to do some tests and different offerings on our web site. We're doing a lot of interesting tests that we've talked to you about. And we've learned a lot of things and I think one thing we've learned is it's a different customer. And so I think you'll see us continue to test and learn and try and try different things to make sure that we're competitive at the low end of the market, as I said at Investor Day, and also collecting for the value that we add at the high end of the market. So I think we're going to continue to test and explore and learn new things. Because I think that's what the web is all about and I'm pleased with the progress that Brad Henske and the team are doing to continue to learn how the market works. And how for us to be even more successful as the leader in the market.

Thank you.

Gentlemen, I'm not showing any further questions. Would you like to proceed with any further remarks?

I just close by saying, we've just had a lot of moving parts in this quarter, hard to understand. I think we're taking a little bit of short-term pressure on these two negative $0.03 hits to do absolutely the right thing long term for the Company. Our Payroll growth is going to accelerate much faster now and we think Digital Insight is going to be nicely accretive to our long-term growth rate and another growth platform. So, I'm looking forward to a solid strong third quarter and talking to you at the end of the third quarter as we're on tap for another great year for Intuit. Thanks, everybody, for their support. Good-bye.

Ladies and gentlemen, thank you for participating in today's conference call. This concludes the call. You may all disconnect.