直覺電腦 (INTU) 2007 Q3 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 third quarter 2007 conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer period.

(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?

Thank you.

Good afternoon, and welcome to the Intuit third quarter 2007 conference call.

I'm here with Steve Bennett, Inuit's President and CEO; Kiran Patel, our CFO; and Scott Cook, our Founder.

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 2006, and our other SEC filings.

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

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

Some of the numbers in this 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'll turn the call over to Steve Bennett.

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

I'm thrilled to be sharing Intuit's record results for our third and most important quarter of the year.

All of our businesses performed well, resulting in third quarter revenue growth of 21%.

This strong revenue growth drove profit leverage, with non-GAAP EPS growth of 27% to $1.13 a share.

I'll share more thoughts later in the call, but I've never felt better about a quarter or a year, and more importantly, what it bodes for the future.

Our strategies in small business, tax, and Financial Institutions are working.

Our right-for-me strategy in QuickBooks continues to pay off.

Total QuickBooks unit were up 20% for the quarter, led by QuickBooks Premier, Enterprise, and Online Edition, which were up 27%.

Payments customers grew 23%, with continued growth in charge volume per customer.

With the transition of our can't-be-bothered payroll customers to ADP, we are now focused completely on the growth area of the business, do-it-yourself and assisted payroll, that matches our strengths.

In Consumer Tax, we won again against low-price competitors, offering TurboTax for free to be competitive at the low end, while growing revenue in total faster than units and holding share on the Web with 17% unit growth in the fastest-growing segment.

Our ProTax business had its best season in years, and Digital Insight delivered great results even before synergies with Intuit.

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 third quarter's results.

Revenue of $1.15 billion was up 21% year-over-year.

Non-GAAP earnings were $1.13 per share, $0.04 above the high end of our guidance.

On a year-over-year basis, non-GAAP EPS was up 27%.

These results include the impact of the acquisition of Digital Insight and the sale of certain payroll assets to ADP.

Without those items, revenue growth would have been 14% for the third quarter and 11% year-to-date.

Now the results of our business segments.

Third quarter Consumer Tax revenues of $567 million was up 14% over the year-ago period.

Season-to-date, Consumer Tax revenue is up 15%.

Year-to-date TurboTax federal units are up 17% on the Web and 6% overall, despite passing on some low price bulk deals early in the season, which would have added about 2 points of growth to our non-Free File Alliance unit numbers.

We now expect Consumer Tax revenue to grow 14% to 15% for the full year.

Professional Tax revenue is up 6% year-to-date.

Revenue for the third quarter was $138 million, up 32% over the third quarter of 2006.

Recall that the third quarter revenue includes approximately $25 million that shifted from the second quarter to the third quarter compared to last year.

We now expect ProTax revenue to grow 4% to 5% for the full year.

QuickBooks had an excellent quarter.

Revenue was $155 million, up 22% year-over-year.

Software units grew 20%, with particular strength in the Premier Edition and in Simple Start, which is targeted for new small businesses.

Year-to-date, QuickBooks revenue is up 10% and software units are up 8%.

Our Payroll and Payments business had revenue of $125 million, up 7% year-over-year.

The Payments revenue growth was driven by 23% growth in customers and 8% growth in transaction volume per customer.

Segment results reflect the transition of our fully outsourced Payroll customers to ADP.

Without that one-time event, Payroll and Payments revenue would have been up 13% this quarter.

Total Small Business, which combines our QuickBooks and Payroll and Payments segments, showed revenue growth of 15% for the quarter and 12% year-to-date.

Financial Institutions revenue of $65 million includes the results of Digital Insight, which was acquired on February 6th, and the Financial Institutions business previously reported in our Other Segments.

Since this is the first quarter that we're including DI's results, the revenue growth percentages aren't meaningful.

On a stand-alone basis, DI's core Internet banking revenue grew about 14% and total revenue grew 11%.

These results are consistent with the trends and guidance DI had given prior to the acquisition.

You should note that our fact sheet now includes two customer metrics for this segment, the number of Internet banking end users and the number of bill pay end users.

In the third quarter, Internet banking end users grew 17% and bill pay end users grew 26% over the same period a year ago.

Our Other Businesses segment revenue was $104 million, up 6% led by Intuit Real Estate Solutions, which grew revenue 26%.

Moving to the balance sheet, Intuit ended the third quarter with $1.4 billion in cash and investments.

We used $301 million to buy back 10.4 million shares of Intuit stock during the quarter, completing our previous authorization.

Today we announced an additional $800 million for future share repurchases.

During the quarter, we replaced the bridge financing put in place for the acquisition of Digital Insight with long-term financing.

We issued $500 million of five-year notes and $500 million of ten-year notes.

We also secured a $500 million revolving credit facility.

I will now review our updated guidance for the year.

The revenue guidance has increased.

Our previous guidance, which included the impact of the DI acquisition and the sale of Payroll assets to ADP, was for annual revenue growth of 12% to 14%.

We now expect annual revenue growth of approximately 15%, and expect full-year revenue to be in the range of $2.685 billion to $2.7 billion.

Non-GAAP diluted earnings per share guidance has also increased.

We previously projected a range of $1.33 to $1.37.

We now expect to be between $1.38 and $1.40.

This new guidance represents year-over-year non-GAAP EPS growth of 14% to 16%.

Finally, GAAP diluted earnings per share guidance has also been raised.

We previously projected a range of $1.10 to $1.14.

We now expect between $1.15 and $1.17.

Fourth quarter guidance is unchanged.

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

Thanks, Kiran.

As mentioned earlier, it was a great quarter.

All of our businesses delivered strong results, and we're on track to deliver another great year, with revenue growth of 15% and EPS growth of 14% to 16%.

While we've consistently grown revenue at double-digit rates, the questions investors always ask is, you have such high share, how will you continue to grow?

Let me share the most critical thing that drives our sustained growth.

We grow revenue by growing our existing categories and by creating brand new categories for Intuit.

We grow our existing categories by making customer experiences better on our existing offerings and creating positive word of mouth from our large customer base that translates into customers buying more and telling their friends.

And Intuit products become the de facto standard.

We create new categories by solving additional, important customer problems with innovative products and services that convert nonconsumption or disrupt higher priced alternatives.

Our customers derive benefit from our products and services over an extended period of time, so we benefit from recurring service revenue, repeat purchases, upgrades and sales of additional services to our customer base.

That's the simple formula.

So now let's look at the proof points, starting with Consumer Tax.

The compound annual revenue growth rate for Consumer Tax during the last five years has been 19%.

And revenue this year will be more than $800 million, all from growing the category.

Looking more recently, Consumer Tax is coming off enormous growth last year, and we grew revenue strongly again this year.

Why?

Well, first, we continue to benefit from positive market trends.

About 5 million new filers enter the market each year and 3.5 million depart.

Software gets a disproportionate share of these new users because software offers the best value and highest net promoter score of any tax prep method.

Second, we continue to innovate and learn.

So while our strategy was unchanged, there were two things we needed to test this year, both to get market learnings, as well as have another strong tax season.

We needed to be more competitive at the low end on the Web for people with simple tax returns, while capturing more value from those with more complex returns.

And we needed to test price elasticity at retail, where unit growth has slowed the last few years.

The result: We executed well and got great insight that will help us next season and beyond.

On the Web we offered free TurboTax to be more competitive at the low end and expand our served market, while raising prices and improving functionality at the high end.

The result: We grew units without cannibalizing our paid offerings and held share on the Web, showing again we can win with, and against free.

At retail, we strengthened our product line-up and raised prices.

The outcome: We grew margin dollars, while holding unit share roughly flat.

A big win.

We didn't get everything right.

We passed on some low-priced bulk deals early in the year that we had won the previous year, and that would have added an additional 2 points to our non-FFA unit growth for the season.

This had a big impact on some of the unfavorable comparison with competitors earlier in the year.

And while we held unit share, we were disappointed in the category growth at retail.

But overall, it was another great year for Consumer Tax.

With the results we saw and what we learned, we're more confident than ever in our ability to grow long-term.

Let's switch to Small Business.

Revenue this year will be more than $1.1 billion, with a five-year compound annual revenue growth rate of 17% as a result of growing the category and creating new categories.

Our two-pronged game plan is working.

We keep improving our existing products and growing the category, while creating new offerings to solve additional customer paying points and create new categories for Intuit.

Many people thought QuickBooks was out of gas after Y2K, when we sold a little over 900,000 units.

This year we'll sell more than 1.6 million.

Of the roughly 700,000 additional units, 300,000 have come from growing the core QuickBooks category, and 400,000 are the result of creating new categories with products launched since Y2K.

Examples are QuickBooks Enterprise Edition, which is now about a $50 million business, and QuickBooks Online Edition, which has more than 100,000 subscribers.

And revenue per customer grows as we solve more of their needs.

This year, we'll sell more than 300,000 Premier units at double the price of QuickBooks Pro.

Small business offerings beyond QuickBooks have grown dramatically faster.

We've grown the Payroll category dramatically.

In 2000, we had 566,000 do-it-yourself Payroll customers paying us $69 a year.

Today, we have nearly 1 million paying us more than three times that per year.

The Payments business, a new category, will be more than $160 million this year.

Our Payments business has allowed many QuickBooks customers to accept electronic payments for the first time, converting nonconsumption into growth for Intuit and the banking category.

The long-term trends continued this quarter, with Payments customers growing 23% and charge volume per customer up 8%.

Payroll also grew nicely, and the transition of our can't-be-bothered customers to ADP positions us for accelerated future growth.

Despite years of success, we've got plenty of room for growth in the Small Business market.

60% of small businesses still use manual methods, pencil and paper or spread sheets, to keep their books.

That's a lot of nonconsumption.

Our Payroll penetration of the QuickBooks space alone is only 40%, and for Payments it's only 10%, with additional potential beyond QuickBooks users.

In addition to our existing offerings, we're actively looking for opportunities to buy and partner so we can move faster to solve additional Small Business customer needs.

Just like in Consumer Tax, in Small business we continue to execute our two-pronged game plan and produce solid, consistent results.

Our third and newest growth engine is Financial Institutions, and we're thrilled with the Digital Insight business performance so far.

We had 26% growth in bill pay customers and 17% growth in online banking customers this quarter.

Very solid performance, even before we have seen many synergies from the combined companies.

We announced two new offerings, Personal and Small Business Finance Works, at the annual DI Financial Institution Customer Conference in March.

FIs were very enthusiastic, and we continue to be excited about the opportunity to grow and expand this category.

Similar to our other growth engines, our Financial Institution segment benefits from favorable market trends, as more consumers and small businesses use online banking.

It's another market that is growing with lots of nonconsumption and many unmet, underserved needs that we can solve well.

Another potential growth opportunity is Quicken Health, which is on track to pilot later this summer.

And if we get it right, could be another catalyst for Intuit's long-term growth.

Tying it all together, we like the businesses we're in, we like the strong performance this year, and even more importantly, we like the long-term growth prospects and opportunities for Intuit.

But every year there are things that cause worry and concern among investors about Intuit's ability to grow.

In 1999, Microsoft entered the tax business, and exited in less than a year.

Four or five years ago, the big question was the Free File Alliance and how that would negatively impact TurboTax growth.

Two years ago, the worry was Microsoft's new accounting offering, their third or fourth attempt to challenge QuickBooks.

For the record, the Microsoft stand-alone unit share at retail over the last 12 months has been less than 2%.

And QuickBooks has actually gained unit share at retail since Microsoft launched its new product.

This year, the big concern was low priced TurboTax Web competitors, and we won again.

Next year and the year after, there will be something else.

Some other challenge to overcome.

Yet by getting better at executing our strategy of being in good businesses with strategies to win, talented, engaged employees delighting customers so we deliver sustained revenue and profit growth, Intuit continues to thrive.

And maybe even more important than that, as you can see from today's results, gain momentum.

We have the best talent throughout the organization that we've ever had, and our strongest leadership team ever.

The opportunities in front of us have never been greater.

That's why I feel so great about this quarter, this year, and more importantly, the years ahead.

Thanks to all of you for your support, and to all the Intuit employees that stayed so focused on delivering for our customers.

Now let's get to your questions.

(OPERATOR INSTRUCTIONS) Adam Holt, JPMorgan.

Congratulations on the quarter.

Thanks, Adam.

My first questions are actually on the tax season.

As you think about the market this year, it looks like the IRS is suggesting the category grew about 11%.

As you look into next year, do you think this is the right sustainable growth rate for the market?

And how do you think about your ability to grow with respect to that sort of broader market growth?

I think that the data we've shared, I think Adam, has been consistent that self-prep software has grown, I about what 10% on a compounded annual rate for the last six or seven years.

So this is continued growth right in line with what the market has been doing the last six years.

I think as you take the price deals that we walked away from earlier in the year, that drove a bunch of one of our competitor's growth, we -- and added that together, our units would have been closer to 7% or 8%.

So we would have lost a tiny bit of share, but we would have more importantly, held or grown share on the Web.

So I think that the category -- the best way to predict the future is look at the past, and I still see roughly 9% to -- 8% to 12% growth for self-prep software going forward.

And is it too early to talk about retention this season, and what the impact of some of the price increases might have been on customer retention?

We'll -- it's too early.

We're still tabulating all that data, and we'll obviously share that, as we always do, at Investor Day in September.

And if I could just turn for one question to QuickBooks.

Obviously, good numbers there on the revenue side, where you had a pretty easy comparison.

But the acceleration in units, would you tie that to some of the new marketing programs that you went forward with in the spring?

Or how would you talk about qualitatively some of the drivers behind the unit acceleration?

I think you hit the -- the biggest single new thing we had was the advertising that we had tested for three or four years in TurboTax that had grown the category, and helped us, for the first time ever, we did in QuickBooks, and the same thing happened.

We grew the category faster and benefited from that.

So I think that was the single biggest thing.

Other than that, I think it's just continued great execution by the QuickBooks team and our retail team, better performance on the Web.

We continue to get better at our execution on the Web as a channel.

So I think it's no single catalyst, other than the new advertising.

Just fundamental continued strengthening our blocking and tackling execution.

Thanks for your help.

Heather Bellini, UBS.

Just had a question.

I know it's early, but as you look out to next tax season, what type of strategies do you think you would employ in order to get the unit growth to be -- to bump back up, t.

?

I think, talking to Brad and the team about this, we didn't come out of the gate as fast next year -- this year as we could have in the past.

I think there's lots of reasons for that, that Brad Henske and the team are on.

They've learned a lot.

We've got a great, strong team in San Diego.

They learn quickly, and they have become very good at rapid testing and iteration.

So I think we learned a lot of things this year, that I wouldn't want to share with you at this point, that are very fundamental, tangible things about consumer behavior early in the tax season, that if we adapt, we think we'll get off to a faster start next year.

So stay tuned for that.

I'm not sure we're going to preannounce that.

But next year at this time, we might share the secrets of some of the things that helped us get off to a faster start.

Okay, great.

Thank you.

Brent Thill, Citigroup.

Steve, you mentioned you were somewhat disappointed at retail with the Consumer Tax side.

How much of that was related to pricing and a shift to the Web?

How do you balance those two counterpoints out to what happened at retail?

A couple thoughts.

Number one, it's really retail category growth.

I just saw some data, late data.

We basically held unit share at retail and grew slightly dollar share against a competitor that was pretty aggressive, and in general during the season, was $15 cheaper than us, $5 cheaper on a relative basis than they had been the last couple of seasons.

Despite all of that, we held unit share at retail.

So the issue was not share at all, and the decision we made to actually raise price turned out to be a good one.

The challenge is the category is just not growing.

So that's why we focused more and more about growth on the Web, and we're pleased with 17% unit growth on the Web.

And as I said, Kiran and Bob and I said before the season, our strategy was to manage retail more for margin dollars, and take some of that margin invested in growing share on the Web, and we were pleased with how that all turned out.

And as it relates to your market share on the Web, it's clearly not as high as it is on the retail side.

Can you just talk through your incentives to increase that over the next year?

What steps you're putting in to improve the effectiveness?

I think the competitive dynamics are a lot different on the Web.

And I'm thrilled with the progress we made this year with the new line-up.

We were more competitive at the low end.

We won with a free Federal TurboTax offering, where we were able to get money from state and other things.

So I think we will continue to evolve our thinking.

I think this was a huge breakthrough this year, to offer TurboTax free on the Web and have minimal cannibalization.

That was something that the first time that I gave Brad Henske and Dan Maurer all the credit in the world for that.

They did a bunch of tests, and found that the cannibalization, even when it was on TurboTax.com with all the offerings, and we had limited cannibalization.

So we really played offense.

I think it's the single most significant learning we've had in Consumer Tax in the last ten years, that we could offer for a free product, and it didn't really cannibalize our full-priced offerings, and actually helped us hold share and grow the category.

So I think that was a big learning, and you'll see some new things from us like that in the future.

Thanks.

Laura Lederman, William Blair.

A few quick questions.

Any thoughts on plans to move the free TurboTax customers on the Web to paid, and how you'll do that?

Also, can you talk a little bit about the ad plans for QuickBooks for '08 since they were so successful in '07?

And any just quick thoughts on the price elasticity of demand at retail, and your sense of whether or not you can increase prices going forth?

Thank you.

So, too early, Laura, on the QuickBooks advertising.

I think we're going to kind of take a look and do a postmortem about the ROI on that versus other ways to grow the category or invest to drive growth.

But we were happy with how it resulted this year.

So stay tuned on that one.

There's a lot of things that Brad Smith and the team are going to have to sort through the on that one.

With respect to price elasticity on retail, I don't think we have a huge amount of upward price opportunity in TurboTax.

A $15 difference is pretty big, and I'm pleased that we were able to hold share.

But I don't think the answer is continue to raise price every year.

So I think that's one of the things we'll have to sort out.

And what was the first question again?

Converting free to paid.

Oh, our strategy on this is to be ubiquitous to customers, and offer them different value propositions and price points that meet their needs, and let them choose what's best for them.

So at least at this point, I wouldn't tell you our mind-set is to take people that were free Federal this year and try and convert them.

Their tax situation may change, they may require more complicated returns over their lifetime which would allow them to move up to fully paid products.

But we want to acquire customers, do a great job servicing them, and then have them be customers for life, and buy again and tell their friends.

And that's why we were so pleased with this tax season.

Because we tried some new stuff that really paid off and will help us in the long-term be even more successful.

Thank you.

Scott Schneeberger, CIBC.

I was looking -- I was pretty impressed with your marketing and sales margin relative to my expectation.

I was a little concerned going into the final push of the year.

As we know, the tax season has been moving later.

Could you just speak to how you had such strength at the end?

Do you think it was just your brand that carried you through the surge at the end?

Because it doesn't look like you spent much more incrementally on television or what have you on advertising.

A little more color there, please?

The only thing I would -- Scott may have a thought on this.

But the only thought I have which, is unproven by data at this point, so I hesitate a little bit to throw it out, but I will anyway, is that I believe that at the end, people with more complex tax returns wait more toward the last second in many cases.

And I think TurboTax seems to benefit from -- more from the people that have more complex returns and are more popular.

And my guess is our share is higher with people with complicated returns than it is with people that have -- now that's a hypothesis.

I don't know, Scott, if you would want to add -- or if you disagree, you should dispute this in the public domain.

I think that's a very good hypothesis.

I would add another hypothesis, which is this is a category that responds to word of mouth.

Doing taxes is a somewhat scary thing.

People don't always believe a corporate or an advertiser, but they believe their friend.

So getting friends to tell their friends is one of our highest missions.

It's why we work so hard on the product, on the customer strength.

As we go through season, and as we deliver the goods and delight customers, the word of mouth effect happens, and can -- we know it drives tax purchase and tax share.

I think that's a really thoughtful add.

And I think that's -- we will get more diagnostics on the season as we go forward, and again share them at Investor Day, as we decompress all the data and all the learning.

So I think that's one of the things that we will be looking at.

So thanks for putting that on the table.

Thanks.

One more, if I could.

We're aware you had some technical difficulty in the final days this year in the U.S.

And I'm not fully clear on what happened in Canada.

But can you tell us what occurred there, and how you're working with your technology issues for next year?

Thanks.

The issue was a database problem in our e-filing system.

It was not a problem with the application.

I think that's important to realize.

And so obviously this was a big disappointment for us.

And I'm pleased with our response, and how we work with the IRS and our customers to do right by customers, not charge anybody that had the experience at the end of the year that we weren't proud of.

We've dug back into the root cause of this, and rest assured, we have all our best folks working on this to ensure that we won't have the same problem next year.

In our ProTax business, for instance, we're going to give Pro the guarantees of our e-filing capability.

And our business leader had already sent that out and communicated that.

So we're responding in the right away.

The Canada challenge is a different system.

So there are unrelated challenges in Canada.

I'm not as close to what the root cause of the challenge was up there.

It is interesting to know that the system -- in Canada, they have a government-sponsored Web portal that receives the returns.

It's interesting to know that was down for six weeks during the season last year.

So something that's -- had a big impact on the customer experience in Canada.

So that would be a good thing, Bob, for us to follow-up on and figure out how to communicate what happened in Canada.

I wasn't as close to that.

Okay, thanks.

Nice work in the quarter.

Daniel Cummins, Banc of America.

I wanted to see if we could talk about the sales dialogue with the midtier and small banks?

I was curious if you've seen any significant change regarding their disposition towards subsidizing electronic bill pay?

And if you could just refresh us, how many of the customers in your customer base do and don't charge for it?

And just we're curious about progress you're making in terms of getting the dialogue to be more about a deep relationship with a Company like Intuit, rather than the more narrow offerings at Digital Insight.

Well, I think you highlight the opportunity well in online banking for both consumers and small businesses.

And it's the risk of price compression versus the opportunity for more units.

And so far, we're quite comfortable with how those trade-offs have been playing out.

And our goal on that, by the way, is to continue to prove the value to online banking through integrating our content applications into the Digital Insight online banking offering, so that we provide enough value to more than offset the price pressures, potentially even turn that around.

But we still have to prove that, and when we get our new FinanceWorks for Consumers product in the market, we'll get our first test of that when we get our FinanceWorks for small business in the market.

So I think you ask a very important question.

It's something that is clearly on our radar screen.

So far, all the signs are positive.

But it is something that we're focusing on adding more value so that we change the dynamics of the price negotiation.

I don't have the data, Bob or Kiran, I don't know if you do about what our -- and to be honest, I think that's between them and their customers.

And so that's not data that I would spend a lot of time trying to understand.

At the end of the day, what we want to do is give them a great online banking offering for consumers and small business, and then they'll strategically price that to their customers in a way that best helps them achieve their objectives.

Do you expect to be trying to segment that market?

Have you begun that process, or are you still in the information, data-gathering mode?

We are starting -- the first period, Jeff Stiefler and the team -- we're just thrilled with how well it has gone so far.

But we are -- have been focused on not disrupting a very successful business was our number one priority.

And so we are now just starting -- Jeff and I are just starting to think about what kinds of things we are doing.

We are going to undertake a strategy project, like we did in Small Business and Consumer and Tax.

And that will start in the near future, and I think that will get us at some of the things you're focused on, Daniel.

Because it is a changing environment, and we expect this to be a real long-term winner for us.

So we want to take a fresh look at it with fresh eyes.

Scott, do you have something you wanted to add?

Yes, the thing I'd add, Daniel, about our learnings about the Financial Institutional customers, is the one thing that comes through clearly is what their number one priorities are.

The Financial Institutions' top priorities are to grow customers, retain customers, and to grow balances.

They're trying to grow the revenue side of our their business.

And that's where the FinanceWorks offerings that DI and the Intuit and DI combination is allowing us to build and distribute is so popular and so much in demand.

Because they see these as tools to delight customers, thus retain them, and attract more balances from the customers they have (inaudible).

When you do more -- when a bank can do more and solve more of the customers problems, which is what our tools enable, they get more, keep more, and profit more.

And as just a small proof point for investors on this is -- and I'll be relatively close on this, Bob, will -- in talking to Jeff, Scott Cook and I both spent a day and a half at this Annual User Conference for DI in March, I think it was.

And I think enrollment was at an all-time high.

It was about 40% or 50% higher than they'd ever had before, and there was a lot of excitement about the combination.

So our job now is to convert all that enthusiasm into a great offering, solving important problems.

But I feel that we're off to a good start.

But this will be a long -- this is a marathon, not a sprint, and I'm pleased with the first three months.

Thank you.

[Carlos Morano], Fidelity.

I've got a sort of slightly bigger question.

I'm sort of based in Europe.

I'm thinking about the global consolidation of the space.

We see SAP increasingly talking to get any traction in the small business space, talking about -- beginning to really think about the channel.

You've got Sage, which is sort of a little bit of a global player, but maybe a little bitty, but a little bit unfocused.

We've got Microsoft, there's some tittle tattle they might be thinking about exiting, actually, those software businesses they acquired only a few years ago.

And we've got you, very U.S.

-- obviously very U.S.

focused, and committed to using your cash really for a strong balance sheet in terms of buybacks.

Do you see yourself part of this global consolidation?

How do you think it'll play out?

Well, I would -- number one, I would agree with everything you've said, in terms of the observations you see about the industry on a global basis.

We believe, and are in the process of starting to think about the right way for to us play globally.

And rather than speculate at this time, I will give you a teaser that we don't expect to play in the -- any kind of big consolidation.

We would expect to serve our customers today, 37% of which require global capability, things like multi-currency, and Brad Smith and the team are working on that.

I think the next generation for us will be to think about, are there some Small Business offerings that are more global in nature versus local?

And I think that's the path you'll see us go down.

But I don't -- most of the companies you talk about are in the middle market, other than Sage, and so I think all small businesses are not created equal.

We tend to be focused much more on the lower end of that spectrum than SAP.

And what we've found is that the small companies have much more probability of success moving up than the big companies moving down.

So we like our position, and we are starting to think more about how to play globally now that we continue to grow so well in North America in all of our businesses, and we'll talk more about that -- Brad Smith and his team I think will talk more about that at Investor Day.

So stay tuned on that one.

Okay, sir.

Thank you.

Vick Churamani, Lehman Brothers.

Hi, Steve, Kiran, congratulations on a good quarter close.

Hello?

Hi, Vick, we got you.

Okay.

Thought I hopped off.

Just a quick question on the Consumer Tax.

When you look at the Web category, Steve, what do you think that grew?

I know you guys grew units 16%.

But how do you think the whole -- the entire category grew?

And then in your assumption for about, I guess 8% to 12% self-prep unit growth or category growth, how much do you think -- what sort of growth would be on the Web part of the industry?

And then I have one follow-up.

One thing I got -- we actually finished even stronger than we said, so we did get 17% growth on the Web.

So we think that the Web grew in the neighborhood of 14% or 15% for the year.

And so -- and again, with the two early year transactions that we passed on were both Web-based transactions that would have added a couple more points of growth to our Web.

So, if we would have made different decisions on those potentially, we would have done very well on the Web.

So I think that the Web is going to continue to power the growth.

I think the software or desktop drive to me is going to be flat to slight growth for a while.

I think most of the growth is going to happen on the Web as we go forward for a lot of reasons, and that's why we focus so much and are so pleased we made such progress and got such great learning this year.

I think that all portends well for the future for us, because to win in this business long-term, we've got to win on the Web.

And we clearly did this year, and we're thrilled with the outlook.

So you're saying that you grew faster than the industry on the Web this year?

Yes, that's based on the data that we see.

We think we had slight share gain on the Web.

Okay.

And then on the amount of the refund you guys had to give because of the technical problem, how much was that -- total up to be?

We had estimated that it would have been up to $15 million, but in the end it was closer to $10 million, Vick.

Okay.

And then Steve, one other question.

When you look out for next year's tax season, would you consider having the free offering, which you guys introduced later in the period, to be on permanently?

Is that something that you guys have under consideration?

Yes, that's something that we're going to think long and hard about.

Okay, splendid.

Thank you very much.

Jim Macdonald, First Analysis.

Great quarter, guys.

Thanks, Jim.

On ProTax, it was a much better year than usual.

Can you give us some color on -- especially on a revenue side, maybe some color there?

Yes.

I need to give credit to the leader.

We made a leadership change in Small Business a year and a half -- or in ProTax a year and a half ago.

And that's the single thing that has driven -- the team has obviously done a lot of hard work and executed well.

But from strategy to leadership to execution, our leader in ProTax has just done a wonderful job.

The market hasn't changed that much, characteristics haven't changed.

But we've driven tighter strategy, better execution, improved the morale, and we just executed better.

And so the only thing that's really new there is not much in the market, it was stronger leadership.

And that's why we're -- that's why we had the best season in a long time with 6% growth so far this year.

As a follow-up over on TurboTax, could you give us some color on some of the ancillary offerings, like Personal Pro, or any thoughts on some of the newer offerings?

I think those are still early versions to get learning on, and I think let's say that for -- none of which are material, gift card, or other stuff we tried, none of which are material on the numbers.

And so let us capture our thoughts on that, Jim, and share kind of the insight learning on that at Investor Day.

Okay.

Thanks a lot, guys.

Gentleman, I'm not showing any further questions.

Would you like to proceed with any further remarks?

I would just like to thank everybody for their support.

And take a hard look at the script that we wrote up on the fact that we continue to execute this two-pronged game plan, we grow our existing categories, and we create new growth categories for Intuit.

That's a big, single fundamental foundation of why our Company is different, and why sometimes it's hard for us to message, because that's what drives our growth.

But our teams continue to get better at executing and learning by doing, and creating happy customers with positive word of mouth that Scott talked about.

So thanks for your support.

We're thrilled with the year, and we expect another great year next year, and the year after.

See you soon.

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

This concludes the call.