Intuit Inc at Morgan Stanley Technology, Media & Telecom Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Keith Weiss - Morgan Stanley - Analyst : Excellent. So coming off of a solid Q2 print from Intuit, particularly, I would say the small business side of the equation. (inaudible) performed really well, probably a little bit too early say on the tax season. But maybe just from your perspective, can you walk us through some of the key developments in terms of progress Intuit is making in some of the core bets that you guys talked to us about at Analyst Day and what we've seen thus far from that when we think about Q2 results?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. So a lot to unpack there. I want to start on the small business side of the equation. Us, as a research shop, we were excited about small business. coming into calendar '25. We saw a small business confidence starting to improve an administration that is more kind of conducive and sort of open for business. And I think that small businesses are reacting to that. We put out a product we call the small business, the SMB heat map. And the indicators were looking positive, including indicators that you had talked about in terms of some of the stuff that you're seeing in your spending patterns. Over the past couple of weeks, I think some of that confidence has been a little bit shaken, right? You've seen consumer confidence start to come down a little bit. But what are you seeing in sort of the data assets that you have access to in terms of the trends that you're seeing with your customers in terms of the health of that underlying small business?

Question: Keith Weiss - Morgan Stanley - Analyst : And now you guys are focusing upmarket. So you're going into more of like a mid-market customer. Any sort of divergence in the trends you see with small customers versus more customers? Or is that perhaps maybe even firmer?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. So in the most recent quarter, we saw a 40% growth in QBO Advanced and Intuit Enterprise Suite. Those moves up market in the second quarter of this year of 40%-plus growth. Equally and maybe even perhaps more important is that we saw the acceleration in the online services ex Mailchimp. So is that is what we're seeing an indication of what you're just talking about, are you starting to see the improving attach rate, the affinity of these higher-end customers to take on a broader set of the solution?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. And within that motion, IES, the Intuit Enterprise Suite, is the newer part of that solution portfolio. You talked about at Analyst Day about, I would say, two kind of core value propositions. One is sort of a consolidation of some of those larger customers that would have multiple instances. And there's an opportunity just in sort of connecting those. The second one being taking down on graduation [rates], giving people a longer runway on the Intuit platform before they have to go to a much more expensive platform with the broader ERP suite. How is those two avenues performing versus your expectations? You saw some good indications out of the gate at Analyst Day, but that was very early. Has it been sustaining?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. So when we think about that move into the mid-market, you've talked a lot about the opportunity. I think you mentioned [880,000] customers within the base that you think are appropriate for IES, but you also have the direct sales motion that you're building out. You talked about the 60% improvement in terms of productivity there. Do you get to leverage the accounting channel in the same way when you go into that mid-market customer as you did for the small businesses?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. Got it. I want to talk a little bit about payments. Another strong quarter for payments in Q2. You talked about TPV growth of 18%. In we were talking a lot about [Bill Pay] a year ago. We're not talking about it as much today because there's other initiatives, but how is [Bill pay] doing? How does the monetization side of the equation going against that TPV growth?

Question: Keith Weiss - Morgan Stanley - Analyst : I'm not hearing about it as much in investor conversations either. So it's gotten a little quieter overall.

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. I want to touch on Mailchimp. It's been a drag on overall growth when it comes to the small business segment. The industrial logic made a ton of sense, right? Your customers -- a lot of your customers are using I would say, almost incorrectly using QBO as a (inaudible) CRM system. There's a lot more they can do with the proper CRM system. It sounds like something went a little awry, particularly with the product market fit those smaller customers. What went awry with Mailchimp? What's the fix? And sort of how long is it going to take for that to become the contributor that you guys were expecting when you first made the acquisition?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. So I mean you guys have a plan in place, but it sounds like investors are going to have to be a little bit patience to see that turnaround. It's going to take a couple of quarters at least to start to see sort of the improvement there?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. So one last kind of segment within small business. Frankly, I need your help with, right? Is the desktop business, there's been a lot of changes that are taking place in terms of desktop in terms of the accounting around desktop in terms of there's been $50 million of revenues that kind of spread out throughout the year that we hadn't seen historically because of the product cadence. There's end-of-life dynamics going on with the non-enterprise SKU. How should we think about sort of the durability of growth for desktop on a go-forward basis? Is this still an area that you think can be a grower? Or at some point, does this become a sort of a diminishing asset as more and more people just shift into the online assets.

Question: Keith Weiss - Morgan Stanley - Analyst : Okay, that's super helpful. Within the small business group, the AI opportunity, to me, seems robust. It seems like a if we think about one of the core value propositions in generative AI is accelerating expediency for the user, right? And your core customer is a business owner, a small business owner who has to understand working capital but they're not a CFO, right? They have to understand marketing attribution, but they're not a CMO. It seems like there's a real for Intuit to step in and provide that proficiency vis-a-vis Intuit assist vis-a-vis degenerative AI. Where are we in terms of building out those solutions? Where are we in terms of you guys being able to well address that potential opportunity? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 9:05PM, INTU.OQ - Intuit Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Keith Weiss - Morgan Stanley - Analyst : So better funnel conversion in terms of getting customers on board, better attach of additional solutions because you're showing them kind of where to attach that and better pricing power.

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. And just a double click. You mentioned that the developments you've seen over the past couple of months have really bolstered your confidence in these general solutions. Is that somewhat related to sort of the head count reduction that you did last summer. You guys talked about it in terms of upskilling, if you will, of bringing in the right people to be able to sort of advance the solution. Is this some of the early gains of that?

Question: Keith Weiss - Morgan Stanley - Analyst : Right. Got it. Got it. And within that, does that relate to -- I think you gave a number of like $90 million in annualized savings on customers is that part of those productivity gains?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. I want to shift gears and talk about tax. The -- it's not an understatement to say that the level of an investor apprehension about tax is high. And we kind of know where it came from. Last season, tax underperformed. This season, you guys have put into place a different strategy. and investors are yet to be convinced. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 9:05PM, INTU.OQ - Intuit Inc at Morgan Stanley Technology, Media & Telecom Conference So can you talk to us a little bit about what happened in tax last year and how you look to kind of course correct for that this year to get units driving better but still be able to sustain kind of good monetization of those?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. If I may, -- can we get through some of like the (inaudible) cases that I hear just the easiest way to kind of get through them. One, in terms of sort of the core DIY business, you guys are introducing lower price points. You have some free offerings. There's a concern that, that's going to bring down overall ARPU. But it sounds to me like the sort of other side of the equation is you're being very targeted about where you put those offerings. So should we be concerned about overall ARPU coming down this tax?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. A second (inaudible) case here is large language models, perhaps cannibalizing the TurboTax Live offering. TurboTax Live is fundamentally help offering. Like you have -- you get stuck, you press the button and someone's going to come and help you. Why doesn't that get done for free

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. And then the third one I hear a lot is (inaudible), right? And there's some parts of (inaudible) that should help because they are deprecating their direct file solution after this year. But the concern is that we'll see a broader kind of simplification of the tax code, which would devalue kind of (inaudible) overall. How do you guys think about that potentiality?

Question: Keith Weiss - Morgan Stanley - Analyst : I agree with that. And the last one I want to touch on is just in terms of marketing spend, in the first half of the year, you guys have seen good expansion of operating margins. There is a concern that as we get into the meat of the tax season because you're looking to drive units marketing spend spikes and that's going to drag on margins in the back half of the year. How should we think about sort of the cadence and the linearity of the marketing spend this tax season press versus like prior taxes we see?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. Got it. And then the -- when it comes to the marketing and the earlier marketing data around the full assess category, which you guys have talked about, it's a [$35] billion category that you're trying to kind of break into. How is the efficacy of that early marketing spend been? Has it had the desired effect of getting those relationships started earlier?

Question: Keith Weiss - Morgan Stanley - Analyst : Okay. Got it. Squeeze one last one in 5 seconds. Operating margin expansion has been a solid part of the Intuit story for years now. You guys have done a really good job of consistently expanding margins. Is there room to go in that effort? Is there kind of more upside in terms of where Intuit could take the overall operating margin profile of the company? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 9:05PM, INTU.OQ - Intuit Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Keith Weiss - Morgan Stanley - Analyst : Outstanding. Unfortunately, that takes us in or our time. But Sandeep, thank you so much for joining us.