直覺電腦 (INTU) 2012 Q3 法說會逐字稿

Good afternoon.

My name is Sahid, and I will be your conference facilitator.

At this time, I would like to welcome everyone to Intuit's third-quarter fiscal 2012 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 will now turn the call over to Matt Rhodes, Intuit's Director of Investor Relations.

Mr. Rhodes, you may begin.

Thank you, Sahid.

Good afternoon, and welcome to Intuit's third-quarter 2012 conference call.

I'm here with Brad Smith, our President and CEO, and Neil Williams, our CFO.

Before we start, 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 2011, 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 report are presented on a non-GAAP basis.

We have reconciled the comparable GAAP and non-GAAP numbers in today's press release.

Unless otherwise noted, all growth rates refer to the current period versus the comparable prior-year period.

A copy of our prepared remarks and supplemental financial information will be available on our website after this call ends.

And with that, I will turn the call over to Brad Smith.

All right.

Thanks, Matt.

And thanks to all of you for joining us today.

Let me begin by sharing my reflections on our third-quarter results.

We delivered 11% revenue growth in Small Business.

And year to date, we have delivered 11% revenue growth in Consumer Tax.

That is solid performance overall; but to be candid, we did not deliver the best tax season that we could.

We are capable of more, and we are going to need to execute better next year to deliver the performance that we and you have come to expect from a category leader.

Since it's top of mind, let me review our performance in our Consumer Tax business first.

As you know, there are four main drivers of growth in the tax business.

The first driver is the number of tax returns filed with the IRS.

Latest estimates are that the total number of returns filed grew roughly 2% year over year, which was a little better than our expectations.

Now, the second key driver is digital category growth.

As the category leader, we had planned to grow the digital category faster than its historical rate of 6%.

The digital category ended up growing about 5% year over year.

While that is significantly faster than any other method, we did not succeed in accelerating the pace as we had planned.

Our research tells us there are 40 million filers who currently have their taxes prepared with assistance, but they would be willing to file their own taxes digitally.

To grow the category this year, we had built our game plan based on attracting more of these filers by providing free tax assistance.

We think our free tax advice offering helped improve the overall net promoter score for TurboTax, and it helped increase our acquisition of first-time tax filers, which grew 34% this year.

It also helped us convert more customers from tax stores than we did last year, although we fell short of the goal that we had set for ourselves.

Those that use free tax advice gave it high marks, but many TurboTax customers weren't the aware of the offering.

So, not bad for year one, but we can do much better.

Shifting to the third driver in tax is our fight for share within the digital category.

This is another area where we did not achieve our own expectations.

In the online channel, we had planned to take another point of share.

The reality is, our online share was relatively flat year over year, at about 60%.

While that is three times greater than our nearest competitor, it's not the trajectory nor the goal that we had set for the season.

In the retail channel, where we have approximately 85% of share, we held share there as well.

And in the Free File Alliance, where we donate our software for free to qualified filers -- and as you know, we are prohibited from cross-selling or upselling -- we actually lost share.

While this may not have a commercial impact, we are not pleased with that outcome and it's something we plan to address.

So, net net, we need to step up our game as we compete for share next tax season.

Finally, the fourth driver is revenue per customer.

This was a bright spot this year.

We grew paid units 7% for the season, while growing revenue 11%, implying about four points of growth coming from improvement in revenue per customer.

The majority of the improvement came from increased conversion from free to paid and better overall mix, and was also helped with growth in our debit card business.

But as we told you in the past, our priority is to compete for category growth and share.

And if we had our druthers, we would prefer that unit growth outpaces revenue growth, giving us the opportunity to monetize those customers over their lifetime.

So, with this assessment of our Consumer Tax season, let's not lose sight of the bigger picture in tax.

We have 25 million active TurboTax customers; and as I mentioned, our research tells us that 40 million more filers are willing to use software to prepare their taxes.

We continue to be at the center of the shift to digital tax prep, which we estimate grew at 5% this year, even when we didn't do our job and play our best game.

We will apply what we learned this year as we look forward to next tax season, and we will share more about our plans with you at Investor Day in September.

But now, let me shift over to our largest business, our Small Business Group, where we posted 11% revenue growth this quarter, and we are continuing to build momentum.

Our Connected Services strategy is paying real benefits, as more small businesses turn to the cloud.

As a reminder, Connected Services revenue is more predictable and recurring, with a higher lifetime value per customer.

This quarter, QuickBooks Online subscribers grew 31%.

And while we are still early in our global expansion, we have seen signs of success in markets outside the US, as well.

Our Small Business payroll service is also benefiting from a shift to the cloud, with the Intuit online payroll subscriber base growing 19%.

And Small Business Payments customers grew 13%, with GoPayment driving both [attached] and new to the franchise customer acquisition.

While I'm on the subject of payments, I realize there is a lot of buzz in the marketplace about established and new players entering the mobile payment space.

Let me simply say it is not a zero-sum game.

Less than half of small businesses accept credit cards today.

So, generating more enthusiasm for mobile payments creates greater category awareness and faster growth for all of us.

We have a $400 million Payments business that processes more than $20 billion annually, helping small businesses get paid, and not just on mobile devices.

With our software, a small business's transaction data goes directly into QuickBooks, with no additional work.

This interoperability, combined with our existing base of 4 million customers, gives us a structural advantage.

Our mobile payment solution, GoPayment, is expanding that market opportunity.

As of the end of April, the active GoPayment customer base was four times greater than it was a year ago.

In fact, GoPayment has driven more than half of our new customer acquisition year-to-date.

Overall we produced 14% revenue growth in our total Payments business this quarter, and we expect the Payments Group to be a key driver of Small Business revenue growth in the coming years.

Finally, we have been actively managing our Company portfolio, strengthening and adding assets in our Small Business segment while divesting non-strategic assets in other areas.

On the acquisition front, there are two strategic transactions worth noting.

Both of them are cloud-based solutions that help our customers get more value from their data.

The first is an exciting move into a critical adjacent segment that we have been foreshadowing to you for some time -- the front office, helping small businesses get and keep customers.

The acquisition of Demandforce will accelerate into its capability to solve this important challenge for small businesses, and will do it with a fast-growing, industry-leading solution that carries a very high net promoter score.

We also made a small talent and technology acquisition in our point of sale and Payments business with the purchase of AisleBuyer.

This puts a little more fuel on the fire of that fast-growing Payments business I was describing a few minutes ago.

Finally, on the divesture side, we completed the sale of our corporate banking business to Bottomline Technologies in the third quarter.

This allows our Intuit Financial Services team to remain laser-focused on innovating for our core customers.

So, that is my perspective on the quarter.

While our overall results were solid, we know we are capable of more.

I remain confident in our strategy and our opportunities for the long-term growth.

And with that, I'm going to hand it over to Neil to walk you through the financial details

Thanks, Brad.

Let's start with overall Company results.

In the third quarter, revenue grew 5%, non-GAAP operating income grew 3%, and non-GAAP earnings per share grew 8%.

As a reminder, last year we saw tax revenue shift from our second quarter to the third quarter, as the IRS was unable to accept certain returns until mid-February.

This created a tough grow-over in the third quarter this year.

Year to date, this impact is normalized, and we grew revenue 9%, non-GAAP operating income 12%, and non-GAAP earnings per share 17%.

We invested a little more than planned this quarter in marketing and support within the Tax segment.

Combined with lower than expected revenue, we saw some margin compression in Consumer Tax.

We offset this in other areas, including reductions in variable compensation and other discretionary costs.

On a year-to-date basis, our margin at the total Company level expanded by about 90 basis points.

Turning to business segment highlights -- our Small Business Group grew revenue 11% overall and expanded segment operating margin by nearly 300 basis points.

In Financial Management Solutions, revenue grew 8%.

QuickBooks online and enterprise customers grew 31% and 19% respectively, demonstrating the continued shift to Connected Services.

Employee Management Solutions revenue grew 12%, driven by improved retention and increased revenue per customer.

And Payments revenue grew 14%, driven by fee structure changes and double-digit growth in total card transaction volume.

Merchants grew 13%, driven by customer acquisition in our mobile solution, GoPayment.

Turning to tax -- year to date, Consumer Tax revenue growth was 11%.

As I mentioned earlier, last year the IRS experienced delays in accepting certain returns, so we grew Consumer Tax revenue 3% over that difficult compare.

Accounting Professionals revenue grew 5%.

Units were up versus last year, but less than our expectations.

We also faced a modest mix headwind, as more customers chose our lower-priced services.

In Financial Services, revenue grew 2%, or approximately 7% adjusting for the sale of our corporate banking business.

New services, such as the updated online banking portal and mobile, are contributing to growth and helping improve revenue per user.

As Brad mentioned, we sold our corporate banking business to Bottomline Technologies in April.

For the third quarter, the impact on Financial Services revenue was about $4 million, and the impact on fiscal 2012 will be about $12 million.

That is factored into the guidance we are providing today.

The business generated roughly $30 million in annual revenue.

Revenue for our other businesses grew 6% in the third quarter.

Small Business revenue in Canada and the UK grew double digits, but Tax grew single digits, resulting in global revenue growth of 7%.

Intuit Health Group revenue grew fast, again off a small base, and Personal Finance revenue was flat.

Shifting to the balance sheet -- in the third quarter we repurchased $207 million worth of shares, bringing us to just under $800 million year to date.

We have $1.8 billion remaining on our authorization.

Our Board approved a $0.15 dividend for fiscal -- [quarter four], payable on July 18.

We also paid off $500 million in debt, which had an interest rate of 5.4%.

The benefit to EPS for fiscal 2012 was already included in guidance, and paying off the notes helps EPS by about $0.05 a year, going forward.

As Brad mentioned, there are two transactions, AisleBuyer and Demandforce, in Small Business to note.

We paid $20 million for AisleBuyer, which brings talent and technology to accelerate our cloud-based point of sale functionality in the Payments business.

And Demandforce's applications automate marketing and customer communication for approximately 15,000 small businesses.

We expect the transaction to add one to two points to Intuit's revenue growth in FY '13, and to be neutral to modestly diluted for earnings per share in FY '12 and FY '13.

Finally, turning to our guidance -- we are updating our fiscal year 2012 guidance.

We expect revenue of $4.205 billion to $4.22 billion, or growth of 9% to 10%; non-GAAP operating income of $1.4 billion to $1.41 billion, growth of 12% to 13%; GAAP operating income of $1.18 billion to $1.19 billion, or growth of 17% to 18%; non-GAAP diluted EPS of $2.92 to $2.97, for growth of 16% to 18%; and GAAP diluted EPS of $2.44 to $2.49, growth of 22% to 25%.

For the fourth quarter of fiscal 2012, we expect revenue of $647 million to $662 million, growth of 9% to 12%; non-GAAP operating income of $30 million to $40 million; GAAP operating loss of $15 million to $25 million; non-GAAP diluted EPS of $0.05 to $0.07 per share; and a GAAP loss per share of $0.05 to $0.07.

And with that, I will turn the call back over to Brad.

Great.

Thanks, Neil.

So, to close, I would like to remind you of our growth strategy, which guides everything that we do at Intuit.

It is foundational, and it's built to endure fluctuations in the economy and our business performance.

Our strategy has enabled us to deliver revenue growth at 12% on average over the past five fiscal years, with 400 basis points of non-GAAP operating margin expansion.

Just as a quick reminder, that three-point growth strategy is to first, drive growth in our core businesses; second, to build adjacent businesses and enter new geographies; and third, to accelerate our transition to a connected services Company.

We have a broad portfolio of solutions for consumers and small businesses, which provides resiliency as we execute against our long-term growth objectives.

We are innovating across our businesses to create the next wave of customer acquisition, which will continue to come from connected services, mobile solutions, and increasingly, data-driven insights, or what we call big data for the little guy, to help our customers save time and money.

Overall, as consumers and small businesses continue to adopt technology, our opportunity to innovate and convert non-consumption remains strong.

We expect to grow this Company's revenue double digits, with margin expansion over the long term.

As always, I want to thank our employees for their hard work and their ongoing focus.

And with that, we would like to open it up to you for your questions.

Scott Schneeberger, Oppenheimer.

Just a couple things within Consumer Tax -- Brad, could you speak to what type of spend you delivered with regard to TurboTax this season?

Did you increase late season or perhaps underspend?

First of all, we increased spending in TurboTax.

We actually increased the investment in marketing and customer care, which includes free tax advice agents and extra customer care people, by about 16%.

I think the overall marketing increase was in the neighborhood of about 7%.

So, we continued to invest.

We played this thing whistle to whistle.

I would tell you that it wasn't the level of investment; I'm not pleased with the return on that investment.

I think we had a better opportunity to get our message more effectively communicated, and I think we will take some lessons learned as we step back this year and get ready for next season.

Thanks.

And following up -- obviously, a strong revenue per customer number this year.

Could we peel back down a little bit, just with regard to some things you mentioned where conversion mix, debit card, refund transfer probably applies, and just give us a feel for the drivers within the pricing improvement?

Yes, Scott.

I will give it to you at the macro level.

The biggest driver was improved free to paid conversion.

That was the biggest mix opportunity we had.

We also continued to see customers come in and choose some of our more premium-priced products.

And we mentioned a few minutes ago that we also had continued growth in our debit card business, which helped as well.

But the biggest of those drivers was really the free to paid conversion.

Okay, great, thanks.

I will turn it over.

Sterling Auty, JPMorgan.

Following on in terms of Consumer Tax -- can you talk to us about what you did in terms of pricing?

And Brad, you mentioned it was the return on that investment.

Is there specific advertising channels or items that you could point to that you felt you weren't getting the return on?

So, first and foremost, our pricing was pretty consistent with where we were last year.

There were no real changes in the marketplace, in terms of the competitive dynamic.

We all have an entry-level product that begins with free, and we tend to have a good, better, best product lineup with the tax services.

And so, it was a typically aggressive game out there.

In terms of the advertising itself, it wasn't a particular channel as much as it was the message.

One of the things we have to do as the category leader is to talk about the benefits of doing your taxes digitally, where you get a superior ease of use at about one-third the price, and you still get the same or even better refund.

If you look at some of the our messages, I think we were a little confusing out there.

We talked about getting free tax advice and help.

We also talked about the notion of free, but we didn't really reinforce the benefits of being able to do your taxes through mobile phones, through tablets or just easier to do it through a PC or the web.

So, it was the effectiveness of the advertising overall across all channels that I think we have the opportunity to sharpen our game as we look to next year.

Okay.

And one follow-up -- the 40 million that said that they would possibly switch -- did you get a sense, in terms of what it would take to cause them to switch?

We do.

And if you will give me this luxury, we have a very good set of competitors in the market who are probably having the opportunity to read our transcripts.

And so, I would rather talk about that when we are ready to get ready for next year's game.

But the short answer to your question is -- yes, we do have a very good set of insights.

We ran some things this year that we know worked well, and we are going to double down on those as we head into next year.

Fair enough.

Thank you.

Brent Thill, UBS.

Brad, as you have been able to look through the results, is there one thing that you think you could have done that you can change for next year, at a very high level, that you felt stood out?

I know there is a lot of different things you did, but is there one thing that particularly came to mind that you feel you can change?

Yes.

In terms of the tax season, specifically?

Yes.

Yes.

So, I will tell you what I liked about this tax season a lot.

I liked the fact that we had some new insights in learning, and we leaned into the wind and we tried some new things aggressively.

And what we saw was the quality of the product improved.

And that promoter score on TurboTax actually went up about four to five points.

We also had a better customer service experience this year, and those people who used the free tax advice liked it a lot.

The opportunities for us are in two areas -- one I just talked about a few minutes ago, communicating that value proposition as a part of an overall digital offering we could do a better job of.

So, we are going to step back and get smarter about our marketing and how we communicate that next year.

The second thing, which I haven't really alluded to yet, is I'm not sure we were as cost-effective as we could have been, in terms of the ROI on free tax advice.

We like the outcome of the free tax advice.

I think there is different ways to get to that outcome, and we are going to step back and look at those over the season, as well.

And I think that had an impact on some of our spending this year, as well.

Okay.

And just a quick follow-up on the Small Business with Demandforce -- the choice to buy versus partner or build it internally, maybe if you could just help us understand why you took that route.

And what -- this is obviously going to be accretive -- the confidence that gives you that -- that statement on next year's number, if you could just help us understand that.

Sure.

I would be happy to, Brent.

As you know, we have been talking about one of the most important and unsolved challenges for small businesses is to get a customer and keep them.

And then, from there you want to have them pay you and then put that into your accounting.

And we have had a websites business out there for a few years, and we have learned through that experience that getting a website isn't really the outcome that customers are looking for.

They are looking for someone to walk in their door or come to their website or actually call them on the phone.

And what Demandforce has done is basically created an end-to-end value proposition, primarily for appointment-based businesses -- so, professional services, spas, dentists, lawyers, things like that.

And what they have done is they have created a nice little reminder service and an outreach program that leverages social and customer reviews.

And it is so effective that they offer the customers a 3X guaranteed return on their investment.

So, they guarantee they will get a three times better return on increased traffic or retention in customers than what they invest in the service.

And this business has been growing very strong for many, many quarters; in fact, 60 quarters of 80% plus growth.

So, we like the offering.

We think it's complementary to what we are trying to do in the small business front office.

And one of the neat things about it is -- some of those appointment-based customers include things like accountants, and we have a large accountant business; doctors, and we have a healthcare business; and so, there are some potential synergies down the road, as well.

Thank you.

Walter Pritchard, Citigroup.

I was wondering if you could talk to us a bit about the live support piece.

And I'm wondering if you think you actually took customers out of the tax preparer channel with that offering this season?

Or do you think you just simply increased the satisfaction of people that were already coming to you, by them being able to get on the phone and talk to a real person?

So, I can tell you from the data we have, we do believe that we took customers out of tax stores at a higher rate than we did last year.

In fact, we also believe that their net promoter score coming into TurboTax was nine points higher than it was with customers we took out of tax stores last year.

So, they liked having both digital, as well as someone in their corner to answer a question.

We just didn't bring out as many as we thought we would.

We had set an aggressive goal for ourselves, which was baked into our guidance.

We certainly increased the rate, the take rate from what we had last year, but just not at the levels we had hoped.

So, it did more than just increase the quality of TurboTax overall; it helped us also accelerate first-time filers, which were up 34% year over year, and we do believe it helped us take more customers out of stores than we had last year.

Got it.

Neil, just a quick one on the guidance -- does the guidance that you provided for the year, which is really just July -- does that include any contribution from Demandforce?

It's included in there, Walter.

Any estimate on the magnitude of the contribution just in that quarter?

It will be -- in terms of EPS, it's going to be anywhere from zero to a couple of pennies' dilution.

And in terms of revenue, probably around $10 million.

Okay, great.

Thank you very much.

Adam Holt, Morgan Stanley.

I'm going to ask a question about tax as well.

Sorry for all the tax questions, but this is the tax season.

Maybe for Brad -- as you think about the drivers of the Tax business -- as you said, there is share, there is pricing, there is the market.

With the outsized performance in pricing this year, does that change the way you think about the mix of the drivers as you look into next year?

Will you be more reliant on pricing, going forward, do you think?

Yes -- first of all, Adam, don't ever apologize for asking about tax.

We are one of the few people in the world who love tax, so we don't mind talking about it.

The answer is no.

In fact, we continue to have the priority of driving the digital category, and then from there making sure that we drive unit growth in share.

And as I have said in my opening [top] track there, we would love to see units outpace revenue.

But the good news is, we have enough experience in this business that if we see one coming in a little softer, we have other levers we can pull to still deliver the year, which is what we did this year.

But in terms of our priority and our focus, it remains to drive unit growth and customers, to expand the digital category as a result, and then from there to monetize those customers over their lifetime.

Got it.

And if I could just ask a quick follow-up on the Financial Management side -- the number there was a little bit different than we were looking for in the quarter, and it looked like QuickBooks units might have actually been down on a year-on-year basis.

Can you walk through what happened in that business this quarter?

And how you reaccelerate QuickBooks units, as you get into some slower seasonal periods over the next couple of quarters?

Thank you.

Yes.

So, let me first of all break apart the FMS segment, Financial Management Services segment, because it has a couple of pieces in there.

There is the QuickBooks product lineup, and then we also have our website business, and a business called QuickBase in there.

I want to start by saying that the revenue growth of the QuickBooks lineup was actually double digits.

We are having some operational and executional challenges that we are working through with our website business.

It's not growing at the rate we want, our advertising is not having the effective ROI that we are looking for, and we step back and we are looking at that hard.

But QuickBooks overall is healthy.

What you see happening in that franchise is a shift towards the connected services that are more subscription-based, and that is driving a higher lifetime value.

You heard the QuickBooks Online unit is up 31%.

You heard that we had -- the enterprise unit is up 19%, and with that comes a higher revenue per customer.

There is no question right now that the desktop product itself is relatively flat, in terms of units.

And so, you see a mix shift happening to more recurring revenue, higher lifetime value, and we have a desktop customer base that is pretty much flat.

So, that is what I think you see.

In terms of our outlook, we believe this business and this segment is a double-digit revenue grower.

We just have some work to do on the websites business, and we have to continue the transition to more cloud-based revenue in QuickBooks.

That is very helpful.

Thank you very much.

Kartik Mehta, Northcoast.

I just wanted to get your thoughts on category growth.

I think you had said that category growth was 5%.

And you look at IRS numbers, and they are a little different.

And I know there is lots of puts and takes.

Could you maybe walk through the 5% you got to, and how that might differ from the IRS numbers?

Yes, I sure can, Kartik.

And I will tell you, one of the things we are talking about next year is how we think about providing both what is out there in the public domain, and then how we try to translate that so we can help you understand how we look at it.

Let me start at the highest order.

The IRS reports returns; and as you know, returns oftentimes don't equal units.

For example, people who use desktop software as opposed to the web version do an average of 2.1 returns per every unit that we sell them.

They do it for a friend or a family member.

So, we may count one unit, and it would end up being two returns with the IRS.

So, you get a little apples and oranges there.

Our accepted e-file returns at Intuit TurboTax this year was roughly where the IRS was.

It was at the 9% range, which is why we basically held share.

But when we translate that into units, it ends up being about 5% unit growth when we use our translation.

So, I hope that answers the question -- basically, we were about in the same zip code of the overall e-file DIY category.

When you turn that 9% into units, it ends up being about 5%.

Does that help?

Okay -- no, that does help, Brad.

I was wondering -- what is your estimate for the decline in paper and pencil returns?

I know last year there was a nice tailwind because of what the IRS regulations or changes were, and I'm wondering what you have seen this year or what you estimate this year for that decline.

Yes.

This is one of the challenges that we knew we were going to be facing this year, is last year the IRS took some action.

They didn't mail out the paper returns, and so there was a significant exodus out of manual and they went into other methods, including software.

And this year, we knew that we were going to have fewer manual customers, and we would have to continue to get more first-time filers and people out of tax stores.

And for net net, what we think, based upon our data, is that there -- manual was down about 7.5%, 8%, not as much as we thought.

We know that inertia and behavior is hard to change.

And so, without any catalyst coming from the government or the IRS, the people who stayed on paper stayed on paper again.

And so, it didn't go down nearly as much as I think many people estimated.

So, we think manual is down about 7.5%; we think the digital category and units was up about 5%; and we think pros and stores, from our estimates, both grew about [1%].

Thanks, Brad.

And just one last question -- you talked a little bit about the debit business and that being somewhat of a driver to the mix.

And I'm just wondering, could you maybe provide a little bit of granularity -- what happened?

And just some type of range as to the benefit?

Because obviously, that will be an issue for next year or a little bit of a headwind for next year.

Just to understand that.

I'm sorry, when you say a little bit of a headwind?

I just want to make sure I understand the question.

From what I understand from your comments, it seems as though the change you had in the debit program with Green Dot provided somewhat of a benefit to the mix that you reported.

And I'm wondering -- is that a one-time benefit that you received this year, or would you anticipate that benefit continuing?

Oh, I understand.

Well, first of all, the biggest opportunity we have [as a] debit card is getting more TurboTax customers to select that as an option to get their refund.

And we see that behavior happening across our customer base.

And so, we think that is going to be a secular trend that we will continue to capitalize on as we look ahead.

What we did have this year is by moving off of a partnership approach and bringing it in-house, we did get a greater percentage of every revenue dollar.

But that is, I think, not a one -- it's not going to be as big a one-time thing as maybe you may be considering.

Our biggest opportunity here is to get a deeper penetration into the TurboTax base of people actually using the debit card.

Anything you would add, Neil?

No.

I think that is --

Okay.

Thank you very much.

I really appreciate it.

Ross MacMillan, Jefferies.

(Operator Instructions) Greg Dunham, Goldman Sachs.

One clarification on Demandforce -- which products area is that going to be when you report your segments?

That would be the first question.

And then, the second question would be -- this Company gets a much higher AST on an annual basis than you do with QuickBooks -- like 10X or so, by my math.

And I want to ask -- how should we think about the timing of potential cross-sell opportunities of this product line?

And I will leave it there.

Neil and I will double-team on this one.

As we said before, it will be in our Small Business Group, and it's going to report separately to Kiran Patel, our Small Business Group leader.

We really haven't come to closure yet on exactly what line item we are going to include it in on the fact sheet for next quarter, or whether we will have a separate line.

So, we will talk to you more about that as time goes along.

We certainly want to be transparent and let you see how that business is growing and how it's contributing to the bottom line.

In terms of synergies and attachments to other parts of the business, I would suggest to you that is going to be down the road a bit.

This Company is doing extremely well.

It's growing very quickly, and they have a lot of great opportunity in front of them.

We do have lots of great opportunities for cross-sell-type synergies, but I would suggest to you that those may be a little further out.

We will talk to you about that more at Investor Day.

Greg, I will just touch on the final of your points, which was the price point relative to QuickBooks.

You are absolutely right -- customers may have a price point in mind when they are thinking about what they are willing to pay for accounting software.

But when it comes to getting a customer, the ROI is so much more tangible.

And they invest in so many areas, from Yellow Pages to ad words to radio spots to things in the newspaper, that the ability to actually track the results, which is what Demandforce does, can demonstrate the return on that investment makes this an investment they are willing to make.

And the retention rate, as a result, is over 90%.

So, this for us is definitely a higher-value product and a higher ASP product, which we like.

But from a customer perspective, they have a pretty good -- high degree of certainty of what the ROI is on that investment.

Thanks.

Brad Zelnick, Macquarie.

It's Bob in for Brad.

Just a quick tax question -- I know you -- what other factors outside your control happened that you didn't anticipate?

Was there anything on the competitor front that impacted your share gains?

No.

Bob, actually the season was competitive, as we anticipated it would be.

In terms of any of the shifts in the marketplace, there were some early season processing challenges.

The IRS was moving over to modern e-File.

They have been doing a wonderful job partnering with the industry.

In the first few weeks of tax season, there were some customers who were looking for when their tax refund was coming in, and that had some implications in terms of calls coming into our call center.

But by and large, it was a pretty normal season in terms of any particular event.

The one thing we have notice is we continue to see a further push-out in the later end of the tax season when people are going to file their taxes.

So, that final peak gets bigger and bigger every year.

But in terms of any competitive changes or any structural changes, there really weren't any beyond that early hiccup that we had with refunds getting processed quickly.

Thanks.

And can you quickly talk about SnapTax?

How is that doing relative to last year?

Have you seen any improvements?

Yes.

I'm glad you asked the question.

We came out with SnapTax, and then a tablet version of TurboTax for the iPad and the Android tablet.

And we are really excited with the results.

We had over 2.5 million downloads this year.

Now, not all downloads end up processing on that particular format; they will go to PC and web, too.

But right now, what we like is that they were the number-one rated apps in both tablets and phones in the stores.

They had 4.5, 5-star ratings.

It was the number-one selling app in the iTunes store.

And with 2.5 million downloads, we think we are just scratching the surface and moving into the next chapter of what tax is going to look like.

So, so far, so good.

And just quickly following up on that -- out of those 2.5 million, is there any insight into how many actually converted to TurboTax customers?

Yes.

We do have that insight.

Can you provide it, or no?

No.

I don't mean to be flip.

But at this point, I would like to give you just a couple indications of how successful and excited we are, but not give too much up, because it's a pretty competitive situation out there.

Thanks.

That is fair.

Thank you.

Yun Kim, ThinkEquity.

On the Consumer Tax side, when can we start to expect any leverage from the mint.com [install base]?

And then, the other question around there is -- was there any increased efforts to use affiliates or third-party sales channels versus spec advertising and marketing campaigns that you can [spin yourself to try to attract some of the new tax customers]?

Your question on mint.com and the affiliates -- were they specifically targeted at the Tax business?

I missed that piece.

You were cutting out.

Yes.

So, yes, specifically on the Tax side of the business, yes.

Got it.

Actually, our Mint business and our personal finance business overall has been working with TurboTax, and we have had some things that we have been running and testing.

It hasn't had a meaningful impact on tax.

Mint has had a meaningful impact on other parts of the Company, simplifying our first-use experiences in QuickBooks, working with our banking division, and actually working on some neat ideas that we will talk to you about at Investor Day.

In terms of TurboTax itself, we do have the ability for customers to move data from Mint into TurboTax and look for things like a 401K plan or a simple IRA, but it's kind of all baked into the numbers we have talked about here.

In terms of affiliates, we do have offerings with TurboTax that work with bank partners.

And we also have TurboTax online banking that is embedded into many of our bank customers' websites, so they can just download the data right out of online banking and get most of their tax returns prepopulated.

Those are our primary affiliates.

Beyond that, we do have our retail partners, but nothing that we did this year that I think would be out of the ordinary.

Okay.

Just regarding the integration of Demandforce, I'm just kind of curious -- how much of your current Small Business Group is partner-driven, and do you expect that partner-driven business to be somewhat under pressure in the near term, as you potentially run into some channel conflicts?

Yes.

So, we typically today are direct to the customer.

We sell through the retail channels, we sell through the web, and we have a telesales organization.

We do have a third-party partner platform into a partner platform, which is building very strong momentum.

And those typically would be our third-party software developers that integrate with our product, and the data goes back and forth; but we don't have value-added retailers in any large number.

We have accountants that recommend our product, but they don't tend to be [a VAR] channel, per se; they just tend to be advisors who are trusted.

So, we don't anticipate channel conflict in terms of Demandforce, because we typically don't go through other partner channels.

Okay, great.

And if I could sneak one more in -- do you expect your GoPayment business to ramp very aggressively over the next several years?

Are there are any heavy one-time CapEx investment associated with that ramp?

There really isn't.

We have a lot of infrastructure investment that has already been made in our Payments business, and we think there is lots of opportunity for that business to grow in scale within the investment parameters we have already laid out.

So, no.

Okay, great.

Thank you.

Josh [Culver], JPMorgan.

Just a quick question from the fixed income side -- could you talk a little bit about your financing plans, given the recent acquisition?

And also the recent maturity that you had -- any plans potentially to look at the capital markets for financing?

Thank you.

We don't have any plans to talk about today.

As you know, our cash position is very strong, and the cash flow generation -- free cash flow is actually up quite nicely this year, almost 30%.

So, no plans to talk about at this time.

Okay, great.

Thanks, guys.

Thank you.

That is all the time we have for our question-and-answer session.

Gentlemen, I am showing no further questions.

Would you like to close with any closing remarks?

Yes.

Just a couple comments -- first of all, I want to thank everybody for your questions today, as always.

While we didn't execute as well as we would have liked to this quarter, our long-term story remains unchanged.

We continue to see structural shift towards digital, and we think our connected services strategy is proven and it has lots of legs.

As you might imagine, in a Company here that has a lot of competitive people in it, the way we finished up this season feels a little bit like we lost that final game of the season at the buzzer, and so the team is pretty fired up.

We are taking our lessons learned, and we are ready to take the field again.

But we are looking forward to another strong finish to fiscal year '12, and we are already anticipating fiscal year '13.

So, we will talk to you soon.

Thanks again.

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

This concludes the program.

You may all disconnect.