直覺電腦 (INTU) 2017 Q2 法說會逐字稿

Good afternoon my name is Latif, and I will be your conference facilitator.

At this time, I would like to welcome everyone to Intuit's second quarter 2017 conference call.

(Operator Instructions)

With that, I'll now turn the call over to Jerry Natoli, Intuit's Vice President of Finance and Treasurer.

Mr. Natoli?

Thanks, Latif.

Good afternoon, and welcome to Intuit's second quarter FY17 conference call.

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

Before we start, 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 learn more about these risks in the press release we issued earlier this afternoon, our Form 10-K for FY16, and our other SEC filings.

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

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

Some of the numbers in these remarks are presented on a non-GAAP basis.

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

Unless otherwise noted, our growth rates refer to the current period versus the comparable prior year period, and the business metrics and associated growth rates refer to worldwide business metrics.

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

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

Thanks, Jerry, and thanks to all of you for joining us.

Our second fiscal quarter once again reflected strong momentum across the business.

QuickBooks Online subscribers and online ecosystem revenue demonstrated continuing acceleration from prior periods.

As a result, we now expect third quarter QBO subscribers to be roughly 2 million, which had been the low end of our original guidance for the full fiscal year.

Looking beyond Q3, we now expect to exit the fiscal year with 2.2 million subscribers, which had been the high end of that range.

I'll talk more about what's driving these results in a minute, but given it's tax season, let's focus there first.

Despite the slow start to tax season, we remain confident it's simply a shift in timing, with the do-it-yourself software category and TurboTax performing well season-to-date.

This timing shift did lead us to update our outlook for the quarter, while reaffirming our full-year guidance.

Each tax year is different, this one is no exception.

The IRS data released this morning showed total e-filed returns are down 13%, with self-prepared e-files down 11%, and assisted e-files down 16%.

When you compare these results to the data that we released today, the conclusion we reach is the do-it-yourself category is performing better than assisted, and we are performing well within the do-it-yourself category.

So it's helpful to put our season-to-date results into this context.

Now let me take a minute, and remind you of the four main drivers for the consumer tax business.

The first, is the total number of returns filed with the IRS.

The second, is the percentage of those returns filed using do-it-yourself software.

The third is our share within the do-it-yourself software category, and the fourth is the average revenue per return.

Total returns filed with the IRS have grown on average 1% per year over the last five years.

Now we've grown quite a bit faster than that, by focusing on growing the do-it-yourself software category, and then growing our share within that category.

So despite the slow start to the season, do-it-yourself software is once again growing faster than other methods, and our volume suggests that we are performing well within the category.

Now the question on everybody's mind is, what's behind the slow start to the filing season?

There could be several reasons.

The IRS suggested in its release that the PATH Act has led some to delay their tax filing.

Now as a reminder, the PATH Act is new legislation in service to fighting tax fraud that delayed refund processing to February 15 or later, for anyone who is filing for the earned income or additional child tax credit.

Now regardless of the root cause, we remain laser-focused on making sure we have the best offering, and an awesome end-to-end experience for our customers.

Now there's no question this is a fiercely competitive tax season, with new entrants joining the completely free category.

Free offerings are not new to the category, and they're not new to us.

And our strategy to win with free remains unchanged.

We are firm believers that not all free products are the same.

Having the best free offer and a delightful end-to-end experience is what sets us apart.

With Absolute Zero, we continue to believe that we have that winning experience.

It's an alternative that is innovative for more than 60 million people who file a simple return, and may be overpaying for this service somewhere else.

In fact, roughly 30 million of these 60 million Americans visited a tax store or a tax professional, simply because they have a nagging question.

In the end, they pay hundreds of dollars to file their taxes.

This is where SmartLook comes in, providing access to an expert at the touch of a screen, for a much lower cost.

Now this is simply one of the many innovations that our tax team delivered this season.

Other innovations include improving data import, through taking a picture on a smart phone, while continuing to expand available W-2 and 1099 forms for direct download.

We've also been applying machine learning and artificially intelligent algorithms to the data, to get maximum deductions in less time.

We're transforming TurboTax from an application to a platform, with our first partner providing the ability for customers to refinance their student loan at a much lower rate.

And we're delivering a free credit score to all TurboTax customers.

On top of these innovations, we also introduced TurboTax Self-Employed this season.

This offering includes a 12 month subscription to our QuickBooks Self-Employed accounting solution, connecting our market-leading QuickBooks platform to TurboTax.

So to put a bow around the tax season to-date, we remain confident about the plans we have in place.

When it's all said and done, we know taxpayers will still need to file by April 18, so we're focused on executing with excellence.

On the ProConnect side, we continue to focus on winning with multi-service accountants who do both books and tax.

We're off to a strong start, and our important accountant relationships are helping to drive QuickBooks growth opportunities.

Shifting to small business, we continue to be pleased with the growth in our QuickBooks Online ecosystem.

Subscriber growth is accelerating, driven by product and platform innovation, improved product market fit outside of the United States, and a further expansion of our addressable market by targeting the self-employed segment.

Total QuickBooks Online subscribers grew 49% in the quarter, up from 41% growth in the first quarter, and now shows more than 1.8 million subs.

Outside the United States, our subscriber base grew 61% year-over-year to approximately 370,000 paying subscribers, which is up from 50% growth in Q1.

We saw a notable pickup in markets where our product market fit meets our test of readiness, including the UK, Australia and Canada.

In fact, both the UK and Canada surpassed 100,000 subscribers in Q2.

We introduced several innovations on the QuickBooks Online platform this quarter, including a complete re-imagination of QuickBooks.com, and the QuickBooks Online first-time use experience, all in an effort to increase awareness, trials and conversion.

This is complemented by new matchmaking service that connects small businesses with an accountant.

In addition, we're also building momentum behind QuickBooks Self-Employed.

Roughly 180,000 of our QuickBooks Online subscribers are using QuickBooks Self-Employed, up from 110,000 subs last quarter, and 50,000 subscribers just one year ago.

In the quarter, we expanded QuickBooks Self-Employed to Canada, adding another major geography to the current distribution that we have in the United States, in the UK and Australia.

Finally, we launched a new QuickBooks Self-Employed and TurboTax experience as well.

While it's early days for all of these innovations, the accelerating growth gives us confidence that our strategy is working.

In fact, online ecosystem revenue posted 30% growth in the quarter, up from 26% in Q1.

To continue this momentum, we're investing, investing to improve the experience for customers and partners, while getting the message out to more potential customers through events like QuickBooks Connect.

Our first QuickBooks Connect conference outside of the United States will be held in the UK in March, with Australia and Canada soon to follow.

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

Thanks, Brad, and good afternoon, everyone.

For the second quarter of FY17, we delivered revenue of $1.016 billion, up 10% year-over-year.

GAAP operating income of $22 million, versus $42 million a year ago.

Non-GAAP operating income of $106 million versus $114 million a year ago, GAAP diluted earnings per share of $0.05 versus $0.09 last year, and non-GAAP diluted earnings per share of $0.26, up from $0.25 last year.

These results reflect the revenue shift we announced on February 8.

Turning to the business segments, consumer tax revenue was $285 million for Q2.

Brad already walked you through our analysis of the season so far.

TurboTax processed e-files were down 10% through February 18, performing slightly better than the do-it-yourself category.

We remain confident in our overall plans for the year, and for consumer tax revenue to grow 6% to 8% in FY17.

ProConnect revenue was $99 million for Q2.

We continue to expect revenue to be roughly flat in FY17.

While the growth rate was stronger than our long-term expectation this quarter, it was driven largely by the timing of forms availability, which we expect to normalize by fiscal year end.

Moving over to small business, total small business revenue grew 12% for the quarter.

As Brad mentioned, QuickBooks Online subscriber growth remains strong, and we exceeded our guidance for the quarter, reaching 1,871,000 subscribers, up 49% year-over-year.

Small business online ecosystem revenue grew 30% for the quarter, accelerating from 26% in Q1.

The online ecosystem revenue growth is at the high end of our 25% to 30% expectation that we've talked about, and it's [evident] of our ability to improve the monetization of our online subscribers.

Our online payroll and payments businesses remain healthy.

Online payroll subscribers grew 19% in Q2.

Online active payments customers grew 13%, and online payments charge volume grew 17%.

Now you'll note that our attach rates for both payroll and payments dipped in Q2, coinciding with continued acceleration of global and self-employed QBO subscribers.

As we've discussed before, the subscribers don't have the same attach characteristics as our traditional QBO subscriber base.

That's why attach rates aren't as useful as they've been in the past, to predict revenue for this business.

Our desktop ecosystem revenue grew 6%, while units declined 5% year-over-year.

For FY17, we continue to expect units to decline modestly, and desktop ecosystem revenue to be up slightly to flat.

Turning to our financial principles, we continue to take a disciplined approach to capital management, investing the cash we generate in opportunities that yield a return on investment greater than 15%.

We ended the quarter with approximately $637 million in cash and investments on our balance sheet.

Our first priority is investing for customer growth.

We also intend to use our strong Q3 cash flow to repay $500 million of Senior Notes when they come due in March.

We returned cash to shareholders via both share repurchases and dividends.

We repurchased $198 million worth of shares in the second quarter, and $2 billion remains on our authorization.

The Board approved a cash dividend of $0.34 per share payable on April 18, 2017.

You can find our FY17 Q3 guidance details in our press release, and on our fact sheet.

Note that this guidance takes into account, the tax unit performance since January 31, as described in our unit release today.

We reiterated our full-year revenue, operating income and EPS guidance.

As a reminder, we expect to provide a final tax unit update in April, after the tax season ends.

And with that, I'll turn it back to Brad to close.

Thank you, Neil.

To recap, we're pleased with our performance in the first half of FY17.

We're in the heat of another competitive tax season, but there's a lot of time left on the clock.

We remain confident in our ability to compete and win, driven by our laser focus on a delightful product experience that puts more money in our customers' pockets.

We're continuing to gain momentum in our QuickBook Online franchise as well, with strong growth in the US and select markets around the world, driving acceleration in subscriber growth and in online ecosystem revenue.

We're also expanding the category with QuickBooks Self-Employed, and our new TurboTax Self-Employed offering connects our TurboTax and QuickBooks platforms, providing further runway for growth across our ecosystem.

That's the halftime report.

And with that, let's open it up to you, to hear what's on your mind.

Latif?

Thank you.

(Operator Instructions)

Keith Weiss, Morgan Stanley.

Hey, guys, thank you for taking the question, and a nice job on the QuickBooks Online side of the equation, looked really strong there.

I wanted to dig in a little bit on that, in terms of the profitability of QuickBooks Online on a going forward basis.

If we look at the contribution margins you gave, you did see a little bit of a dip in margins from Q1 into Q2.

You talked about it on the call, some additional investments that you're doing, in getting the word out, and sort of the distribution side of the equation there.

How should we think about the profitability of QuickBooks Online on a going forward basis, particularly as you see such good growth in emerging areas like self-employed and international?

Hi, Keith, this is Neil.

There's no question that in the newer markets, as growth ramps up, the profitability is less in QBO than it is in the US, where we have a more mature, stable, traditional base.

But what you're seeing is a big growth rate, accelerate in our online ecosystem, certainly from Q1 to Q2, and over last year.

And as we've talked about in the past, more of the revenue in the online ecosystem is coming from the accounting product itself, from QBO.

And as these customers come off the trial period, as they get past their anniversary cycle, you're seeing some of the increased revenue kick in.

And that's what's really driving some of the growth in the revenue, and in the profitability.

Yes, Keith, this is Brad.

I just want to add a couple points for you.

As we've talked about these emerging markets, one of the key indicators is life-time value to the cost of acquiring a customer, LTV to [CAC].

As you know, the [SaaS] standard is anything north of 3 to continue to invest.

Right now in the United States, our QBO LTV to CAC is 5.5.

If you've add in desktop, it's 6.9.

And if you actually do a worldwide blended number, it's 4.5.

So we feel good that we have a proxy, and know that we're driving towards good profitable growth.

And the second thing is, Neil and I worked with the businesses, and we have a guideline for the small business group that's keeping up business unit contribution, while we're in this investment phase around 40%.

It may go up or down 1 point or 2, based upon choices that we make, but that's a very good, healthy margin for a business that's in good growth, but also continuing to deliver the kind of rigor we want on the bottom line.

So I just wanted to added that, to the two pieces that Neil just put out there as well.

Got it.

So when we look at the 2 percentage point decline sequentially in Q1 into Q2 and the contribution margin, is that just as noise on a quarter-to-quarter mix, or some recent investments?

Or is that just the current sort of mix shift down, in terms of self-employed and international?

Keith, the way I would think about that, is more a function of the rapid growth and acceleration of growth there, where clearly, there have been some investments to drive that growth, both in marketing and in product.

And at the earlier days, as you know from the subscriber life period, they're not paying the full rate in many cases.

So I think it's more a function of the growth curve, and where we are on it.

Got it.

That's very helpful.

Again, a really nice job, building out that subscriber base.

Thank you, Keith.

Scott Schneeberger, Oppenheimer.

Thanks.

Hey, guys.

I'm going to focus a bit on the tax side.

Brad, I was a little bit confused by the quote in the release of the data, that the [Dan Wernikoff] profit quote about the TurboTax e-filed returns down 10% versus prior year?

Could you clarify that relative to the table?

Yes.

I'm going to have Neil and the team here reconcile with the table.

But as you know, one of the things we try to do is translate our unit growth in to e-files sent.

And you know the noise here, you followed the business for a lot of years.

A desktop unit has an average of two e-files each, and then a TurboTax unit is one for one.

And so, what we try to do, since the IRS reports the number of the e-files received, we try to then tell you how many we actually processed.

And what you saw with IRS data release this morning, is the self-prepared e-files are down about 11% year-over-year through 17th.

Our data shows that we're down about 10% through the 18th.

And so, the net-net on that is, we're basically holding to slightly up, in terms of our category, our share in the category.

Now looking at the table, is there something is the table that we need to clarify?

It's just basically the fact that units, are including the retail units.

Got it.

Where you typically get two files from each one of those.

And those come in later.

Yes, so Scott, right now with the headline is, units are down five, our e-files, if we translate that into e-files, are down 10%.

And then the IRS, on an apples-to-apples is down roughly 11% for the self-prepared category, which basically says, what Dan's quote is, we feel good about how we are performing thus far season-to-date.

Got it, thanks for the clarification.

That's what I thought.

I'm just curious, the -- and I'm not sure that you -- how much clarity you will provide, did the one day make a difference on you comping February 18 versus the IRS February 17 this year?

And if you don't want to answer that directly, just what have you seen in the subsequent days?

Do we have the same decelerating negative trend that has shown up in the first few weeks of the IRS data, for you and TurboTax?

Yes.

No, thanks for the question, Scott.

Actually, we have reconciled against the IRS, and the answer is, it does not change materially the outcome that we just subscribed, which is we're performing slightly better than the DIY category, and certainly better than the overall IRS returns, and much better than assisted.

So no real material difference there in that one day difference.

All right, great, thanks.

And then lastly, if I could sneak another in, just the marketing this year, and the slow start to the tax season.

Neil, I guess for you, is there, are you guys calling any audibles on marketing, because we have this shift?

Or was it -- how is the timing of the marketing and magnitude of it on the tax side this year?

Thanks so much.

Yes, Scott, we've definitely made some audibles as you call it, to be sure that the messaging is out in the market, at the time when customers are shopping, and deciding to file their taxes.

So we've made some choices to extend our advertising and marketing a little longer in the season, than we might have expected at the very beginning.

But we've done some internal reallocation of our resources, and we think it's still going to fit inside the same resource envelope we had, when we started the year for the full company.

Great.

Thanks, guys.

All right.

Jesse Hulsing, Goldman Sachs.

Yes, thank you.

Thank you for taking my question.

It looks like, by my math, that QBO growth accelerated internationally within Self-Employed, and also in the US ex Self-Employed.

I wanted to drill, into what might be driving that?

So I guess, maybe this is for Brad.

Do you think it's due to a ramp up in marketing, or are you seeing an increase in velocity and conversion versus your expectations?

Yes.

Thanks for the question, Jesse.

The answer is we're seeing strength across the board.

What's really driving it, the US is up about 36%.

Outside the US, you just mentioned acceleration from 50% last quarter to [61]%.

And then you add on top of that, QuickBooks Self-Employed, which in the quarter added about 70,000 active users, and that's more than all of last year's 60,000.

But the real driver behind is product market fit.

As you know we have a test of readiness, which is in every market, are we able to deliver the benefit the customer says is most important?

And is our ability to deliver that benefit better than the best alternatives in the market?

And once we see that light go green, then we lean in into the accountant channel, and we'll start to make more increased investments in advertising.

So the product is really driving the acceleration of velocity, and then we put top spin on it, by putting more marketing into those markets, because we feel good about the product market fit, and that is currently in Canada, the UK and Australia.

And we've mentioned to you, we haven't taken our eye off the ball in India, France, and Brazil, and we see a springtime window for those to go green.

And then, we'll start to lean in there as well.

So overall it is accelerating velocity.

Got you.

And a couple quick follow-ups.

First, how is retention trending, if you look at it on a -- I guess, a cohorted basis?

I think it had been improving across the board prior to this quarter.

And second, along the same lines, how is ARPU trending on a cohorted basis within each QuickBooks segment?

Thank you.

Yes, you're welcome.

So retention continues to look healthy for us.

Even with this influx of new users, we're still looking at that first year cohort of around 70%.

As they anniversary off that first year, it's pushed out of that high 70%s, and now it's tickling the 80% range.

So it continues to get healthier.

ARPU for us is no different than what Neil shared at Investor Day.

We continue to see the cohorts of QBO or non-US QBO or Self-Employed continue to remain healthy.

When you put them in the mix, it looks like ARPU is coming down a little bit.

That's why we say this is more about staying focused on the ecosystem revenue growth, which went from 26% up to 30%.

We think that is the best indicator of the long-term health of this business.

Thank you, Brad.

All right.

Thank you, Jesse.

Ross MacMillan, RBC Capital Markets.

Thanks so much.

I have two, maybe first just on tax.

I know it's early, Brad, but just wondered, what are you seeing in terms of price realization, just given the more aggressive competitive environment this season?

Well, I think, Ross, the first is, this is a competitive season but it was not unanticipated.

I mean, many of us were talking in the off-season, and we knew that everyone is going to be coming after the market aggressive.

But as I shared in my opening comments, free offerings are not new to the category, and certainly not new to us.

It comes down to who has the best end-to-end experience and product experience, and we feel about our position right now.

The other thing that we talked about going into this season, and Dan Wernikoff did a wonderful job at Investor Day, is we're looking to add more value to our product line up, to attract higher value customers into the category, and ultimately into TurboTax's franchise.

So SmartLook right now is focused on those customers who historically have paid hundreds of dollars to go to an assisted method, and we're bringing them into our category.

The other thing is TurboTax Self-Employed, right now is at an $89 price point, and by hooking that up with QuickBooks Self-Employed, we're getting more of those kinds of customers as well.

So I think you're going to see price realization continue to be a little healthier, if we continue to bring these higher value customers into the category, while we remain competitive on free on the low end.

So at the end of the season, we'll have a better read on that.

But that's our strategy going in, is winning more share of dollars, while also continuing to extend our lead in shared units, and that's our multi-pronged approach.

That's great.

And then, just my follow-up.

Obviously, really strong QBO sub adds, really across the board.

I want to just double-click the core US ads, which I think were about 116,000.

That's by far and away, the best number you've ever put up for that number.

Were there any particular promotions, or was there any other driver in your mind, of why that stepped up so materially?

Thanks so much.

Yes, actually I'm excited to say, that that team has really leaned in to the product experience.

In fact, they prioritized really making the first-time use experience for new to the franchise customers amazing.

They had goals they put in place, to get to a first P&L in five minutes or less, the ability to send an invoice quickly.

They've spent a lot of time looking on what the best leading indicators are, to someone who will turn into an active user.

And that's really what's driven the growth, not only in the US, but around the globe.

There has not been increased promotions, or anything else, it really has been the product.

That's great.

Congratulations, good numbers.

Thank you.

Thank you.

Michael Nemeroff, Credit Suisse.

Hi, this is actually Chris Rochester on for Michael.

Thanks for taking my question.

Regarding the recently announced partnership between Intuit Canada and Uber.

Could you maybe discuss any details on the economic relationship there?

Or is it more going to be [lead-on] for SE, and is there any chance of that relationship expands to the US?

Actually, Chris, we have a relationship with Uber already in the United States, and we simply expanded it into Canada.

We have been working with Uber over the tax season last year, and have worked aggressively in the post-season, to try to make sure that we're helping them with their drivers, be able to separate their personal from their business expense, to be able to keep the mileage log that was up to date and active.

And have the ability for them to file their taxes, and on average, they're saving about $4,300 in tax savings by using our product.

The other thing is the benefit for Uber, is many times last year, the number one call they got from those who were driving for their service was, hey, how do I -- what do I owe for taxes?

So the partnership is a win for them, it's win for the driver, and it's certainly win for us.

And the relationship has been in place in the US, and obviously, you mentioned the one in Canada as well.

And we look that to continue to expand that, and many other relationships, as we focus on the self-employed segment.

Great.

That's helpful.

Just to clarify also, a quick follow-up maybe on the SE number.

Is there any chance you can split that out between US and international, just to get a cleaner sort of QBO US number?

Yes, I would say, Chris, we might consider doing that at Investor Day.

We'll think about it toward the end of the year then, and see if that makes sense.

We always reconsider updating the statistics at the end of the year, to help you in your modeling.

So we'll take a look at that.

Okay, appreciate it.

Thanks, guys.

All right.

Take care.

Sterling Auty, JPMorgan.

Yes, thanks.

Hi, guys.

You mentioned some of the new entrants on the competitive landscape.

I'm just kind of curious, looking at the change in advertising, I think this year out of H&R Block, where are you seeing the competitive pressures?

Is at the new entrants or the existing, established players like H&R Block?

Sterling, it's across the board, I think everyone continues to lean in, and put their best game on the field, and that's good for the category.

If you go back, and look over three decades, anytime a lot of players either get more competitive who are already in the game or new entrants come in, everyone leans into the advertising and marketing muscle.

And that gets more people to raise their head, and say hey, I'm paying hundreds of dollars to go to this service, why don't I try that instead?

I think this is going to be net-net good for the category, it's going to get more people in the do-it-yourself category, and then it comes down to, who has the best offering.

But right now, of course, you've seen H&R Block, a really worthy competitor, someone we have respect for out there.

And they've been aggressive this year.

You've got new entrants coming in, and of course, we've been out there, banging the drum as well.

So I think that, net, we're getting a lot of people excited about the do-it-yourself category, which is good news for the long-term.

And then, you talked about penetrating the multi-service accountants.

Is there a way to think about what portion of that CPA market that represents?

We may have shared -- we'll have to go back and see -- I'm trying to go from memory, if we actually sized that in our Investor Day materials.

I can't remember off the top of my head, how many of the 400,000 firms are multi-service firms.

I'm thinking, it's somewhere in the [200-some-thousand].

Did we size that?

(inaudible) Yes I'm sorry.

I'm going to be guessing, Sterling.

Let us, let's get that answer, and then we'll make sure we get that out to everybody.

But I thought it in [PC] section, that she had sized it in the ProConnect update maybe --

No worries.

Okay.

Sorry about that.

That's okay.

It's a good number.

It's okay.

It's a healthy number, I'll tell you that.

It's not 10.

(Laughter) I hear you.

Thanks a lot, guys.

All right.

Thank you.

Jim McDonald, First Analysis.

Thanks, guys.

Could you talk about how you're thinking about revenue this year for TurboTax versus units, and anything from the offers or mix or price?

Yes, Jim.

We've had a pretty consistent set of guiding principles out there, and then I'll add the asterisks onto this year, as we shared at Investor Day.

So the principles are, the four main drivers of the number of units, or the a number of returns filed with the IRS, and then what percent of those are actually going to the do-it-yourself category.

Underneath that, we fight for share.

And then also, when we try to get a good revenue per return.

As we were going into this year, we always say we like to see units go faster than revenue, and we like to see the category grow faster than the alternative method, because that sets up a good lifeline for future monetization.

Now what we did this year, in addition to that, so nothing has changed in our strategy, what we've done in addition to that, is we've leaned into higher value opportunities.

So SmartLook is trying to get these higher-paying customers out of the assisted method, and we've also leaned into TurboTax Self-Employed.

So we'll see what that does to revenue per return at the end of the year, and ultimately what that does to revenue.

But we're still striving to have healthy unit growth.

And in a good situation, we like to have units outpace revenue.

And just as a follow-up.

Do you think the new products like the refinance your student loan offer, and those kinds of products will have any significant impact in that kind of delta this year?

I'd say, Jim, it's early days this year.

We're getting a lot of good learning, and this is the first of a platform strategy, you saw play out in QuickBooks, that we're now brings TurboTax.

So I think it's going to be fairly immaterial this year, but I think we're going to leave here with a wiser set of ideas and thoughts, as we enter into next season, and we're playing that for the long game.

So I'd say, it will be relatively immaterial this year.

Okay.

Great.

Thanks.

You're welcome, Jim.

Michael Millman, Millman Research.

Thank you.

I guess, some more tax stuff.

I guess, since the last questioner brought up H&R Block, I was wondering if indeed you're seeing some competition from increased RAs, and in their case, Watson?

In addition, I was interested in, if what you're seeing in terms of people going into your website, to check on a product, or how that rates with what you've seen in the past?

And sort of in the same vein, I was interested in what you're seeing in conversion, and where you stand on retention?

Hey, Michael, I appreciate the questions as always.

Let me start first with, we have a lot of respect for all of our competition.

As I mentioned a few minutes ago, everyone out there is being aggressive.

Let me talk specifically to IBM Watson that you referred to.

We've been talking about machine learning and artificial intelligence for some time.

In fact, it's not new, and we have been leaning into aggressively since 2010.

To give you a couple of stats, we have over 100 patents pending right now on machine learning and artificial intelligence technologies.

We have 30 already in the market.

These are algorithms, these are machine learning capabilities, that do things like helping somebody in TurboTax, understand quickly whether they should just go with the standardized deduction, or do itemized deductions, and that can save us as much as 40% of the time, it takes to do the return.

In QuickBooks, we have thing called SmartSort, which is the ability to automatically categorize whether something is a personal or business expense, which allows you to basically to make the right kind of decisions when you file a Schedule C. And there's a whole host of other things that we're doing with artificial intelligence.

So we are excited about the capabilities.

We are always leaning into the future.

And for us, this isn't a new announcement, we've been talking about it for some time.

And it's been showing up, we believe, not only in our product scores, but also in our market share gains.

The second is on the website.

Right now, we haven't broken down our funnel metrics.

We'll do that, and we always do that pretty transparently at Investor Day.

We don't tend to do it mid season, but you heard us reaffirm our confidence for the full-year.

So that gives you some insight, into how we are feeling about our funnel metrics, which include conversion and retention.

I think beyond that at this point, we need to see how the full season plays out.

Thank you, Brad.

John Byun, UBS.

Hi, thank you.

So I think this question may have been asked in a slightly differently way, but wanted to try again.

In terms of the tax trends, given the slow start, I mean, how do you feel about the recovery pace so far?

I mean, realizing you really need the full-year, but is it going at the pace you need it to, or does it kind of need to accelerate in the back half of the season?

Yes, John, thank you for that question.

I think the solace that we all take some comfort in, is that everyone has until April 18 to file.

So whether they jumped in right now, and it's coming back at the pace we hope, or they're going to wait until April 13, 14, and 15, and dive across the finish line, we're prepared for any of those scenarios.

We're out there, as Neil said, making sure that our message is out there today, as they're making decisions.

But we're going to stay in the game, all the way until April 18.

I think there's a lot of pace that's going to have to pick up, between where we sit today and April 18, but that deadline is coming.

And so, I think it's just a matter of when.

Great.

That's helpful.

And then as a follow up, the competition specifically, Credit Karma and H&R Block doing a lot more on the free side, I mean, have you done anything to tweak your execution, or any sort of response in your day-to-day?

And that's it for me.

Thank you.

No, you're welcome, John.

I didn't mean to interrupt you.

I was going to say, we came in anticipating a pretty aggressive season, and we knew that there were going to be players that were going to mirror our Absolute Zero.

And so, we haven't had to tweak anything from a product perspective.

As Neil did suggest though, we did start to make some adjustments to how we get our marketing message out there, since the season got started a little later than we anticipated.

But we've being able to reallocate resources and kind of self-fund that.

So that's really been the adjustment.

Now you might imagine, we have a lot of contingency plans in place, if then scenarios, and those are still sort of in our back pocket.

And we'll just keep an eye on the competition, and we'll make the right kinds of decisions as things move.

Great.

Thanks, again.

Okay.

I did have one -- I realized, Michael, I did not mean to not answer one of your questions.

This is for Michael Millman.

You had asked about RAs, the refund advances.

I think that, we talked about this in the past, that we exited that refund advance, or refund anticipation loan business about a decade ago.

That we didn't feel that was the right approach for families who were looking to get money in their pocket.

And so ultimately, we haven't had that offering for some time.

And during that period of time, the do-it-yourself\-category has grown, and we've gained market share.

So we don't feel we're at a disadvantage this year, any different than we have been for the last decade.

We think the category still going to grow, and we're still going to gain share.

Latif, were there any others?

I'm not showing any further questions.

Would you like to close with any additional remarks?

Yes, I'd be happy to do that.

First of all, we want to thank to everybody for your questions today.

Obviously, we're still in the midst of this peak season, and we do like the momentum we're continuing to build in the small business.

And you heard us reiterate our confidence in the game plan for tax.

We all know there's a lot of time left on the clock, and your questions suggest there's still a lot of time for people to get to the tax filing in.

We know that's going to have to happen, between now and April 18.

So we're looking forward to staying laser-focused and executing.

And we'll catch up with you in the after calls, as well as talk again at the end of tax season.

So thanks, everybody, and have a good weekend.

Ladies and gentlemen, thank you for participating.

This concludes today's conference call.