INTU earnings call for the period ending June 30, 2024.
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Intuit (INTU -0.78%)
Q4 2024 Earnings Call
Aug 22, 2024, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, ladies and gentlemen. My name is Bo, and I will be your conference operator. At this time, I would like to welcome everyone to Intuit’s fourth quarter and fiscal year 2024 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 Ms. Kim Watkins, Intuit’s vice president of investor relations. Please go ahead, Ms.
Watkins.
Kim A. Watkins — Vice President, Investor Relations
Thanks, Bo. Good afternoon, and welcome to Intuit’s fourth quarter fiscal 2024 conference call. I’m here with Intuit’s CEO, Sasan Goodarzi; and our CFO, Sandeep Aujla. 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 fiscal 2023, 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 statements.
Some of the numbers in today’s 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, all 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.
And with that, I’ll turn the call over to Sasan.
Sasan K. Goodarzi — Chief Executive Officer and Director
Great. Thank you, Kim, and thanks to all of you for joining us today. We delivered very strong results for the fourth quarter and full year and made meaningful progress with our AI-driven expert platform strategy and Big Bets that position the company for durable growth in the future. Our full-year revenue grew 13%, and we delivered strong operating margin expansion, demonstrating the strength and momentum of our investments and innovation.
As we exit the year, we’re confident in delivering another year of double-digit revenue growth and margin expansion in fiscal year 2025. Intuit is a global AI-driven expert platform that is powering prosperity for consumers, small and mid-market businesses. Our strategy in five Big Bets positioned Intuit as a mission-critical platform that delivers end-to-end solutions driving sustained growth. We made an early bet on AI.
We have a significant advantage with the scale of our data, investments in AI capabilities such as knowledge engineering, machine learning and GenAI, and our large network of AI-powered virtual experts. This is enabling us to disrupt the categories in which we operate. We are transforming how we serve our customers by delivering done-for-you experiences where we do the hard work for them, connecting them with AI-powered human expertise to fuel their success. With the introduction of GenAI, we’re now delivering reimagined customer experiences and bolstering businesses’ growth potential while driving efficiencies in how work gets done within Intuit.
This has enabled us to build a large, AI-driven expert platform to fuel the success of consumers, small and mid-market businesses. The progress we’ve made has bolstered our confidence, leading us to accelerate investments in five key areas within our Big Bets to deliver greater impact in the future. I’ll spend a moment unpacking the progress we’ve made and our investment plans for the future. First, within Big Bet 1, we’re delivering done-for-you experiences with Intuit Assist.
In fiscal year 2024, we made strong progress making Intuit Assist, our GenAI-powered financial assistance available to millions of consumers and approximately 1 million small and mid-market businesses. We’re accelerating our investments to roll out Intuit Assist at scale in the coming year. Second, within Big Bet 2, we are accelerating platform and go-to-market investments for TurboTax Live and QuickBooks Live, embedding AI-powered experts across our business offerings. In fiscal year 2024, TurboTax Live revenue grew 17% and full-service customers doubled while those customers who needed TurboTax tripled.
QuickBooks Live customers more than tripled. We expect our accelerated investment in these areas to deepen our penetration in very manual, high-priced, and disaggregated assisted categories. By digitizing how services are delivered, an integral part of our done-for-you platform experiences, we will become the AI-powered financial assistant for consumers, small and mid-market businesses. Next, within Big Bet 4, our money solutions.
We’re making additional investments to accelerate digitizing the experience end-to-end for consumers, small and mid-market businesses from estimate to invoicing to getting paid and paying bills. In fiscal year 2024, the total online payment volume we facilitated on our platform grew 20%. We also helped small businesses access $2.4 billion in financing through QuickBooks Capital, up 28% and we made significant progress digitizing B2B payments with our Bill Pay offering for which monthly payment volume processed quadrupled over the last six months. In fiscal year 2025, we expect these accelerated investments to deliver best-in-class, seamless payments, capital, banking, bill pay, and invoicing solutions.
Next, within Big Bet 5, we’re doubling down our mid-market with additional investments in the platform and go-to-market motions. In fiscal year 2024, QBO Advanced customers grew 28%. In fiscal year 2025, we’re accelerating investments to better serve customers who have more complex needs such as more sophisticated accounting and reporting requirements, business intelligence, money solutions, human capital management, professional services, and customer acquisition solutions with Mailchimp, all assisted by AI-powered human experts. And finally, accelerating international growth with Mailchimp and QuickBooks.
We’ve translated the Mailchimp offering into five different languages for markets where we see a large TAM. Looking ahead, we’re bringing QuickBooks and Mailchimp together to create a single growth platform, differentiated in the markets where we have product market fit, including in Canada, U.K., and Australia. In other geographies, we’re leading with Mailchimp’s strong international footprint to help small businesses get customers as we continue to localize the offering. Wrapping up with the progress and momentum we are delivering and the accelerated investment areas I have shared, we are in a great position to win as an end-to-end platform with experiences that fuel the success of customers.
Intuit is the AI-driven expert platform that is powering prosperity for consumers, small and mid-market businesses. With that, now let me turn it over to Sandeep.
Sandeep Aujla — Executive Vice President, Chief Financial Officer
Thanks, Sasan. We delivered very strong results in fiscal 2024 across the company, including total revenue growth of 13%, GAAP and non-GAAP operating margin expansion of 40 and 100 basis points, respectively, and GAAP and non-GAAP EPS growth of 24% and 18%, respectively. Our fourth quarter results include revenue of $3.2 billion, up 17%, GAAP operating loss of $151 million versus GAAP operating income of $17 million last year reflecting a restructuring charge of $223 million recognized in the quarter related to the organizational changes we announced in July. Non-GAAP operating income of $730 million versus $627 million last year, up 16%.
GAAP diluted loss per share of $0.07 versus diluted earnings per share of $0.32 a year ago, also reflecting the restructuring charge and non-GAAP diluted earnings per share of $1.99 versus $1.65 last year, up 21%. Turning to the business segments. In the Small Business and Self-Employed Group, revenue grew 20% during the quarter and 19% for the full year. This momentum demonstrates the power of a small and mid-market business platform and the mission-critical nature of our offerings as customers look to grow their business and improve cash flow in any economic environment.
Online ecosystem revenue grew 18% during the quarter and 20% for the full year, driven by our progress serving customers with more complex needs and adoption of our ecosystem of services. As a result, online ecosystem ARPC grew 11% in fiscal 2024. With the goal of being the source of truth for small businesses, our strategic focus within the Small Business and Self-employed Group is threefold. Grow the core, connect the ecosystem, and expand globally.
First, we continue to focus on growing the core. QuickBooks Online accounting revenue grew 17% in Q4 and 19% in fiscal 2024. Growth for the quarter and year was driven by customer growth, higher effective prices, and mix shift. We delivered growth in our declared strategic areas this year with our emphasis on serving customers with more complex needs.
This focus drove U.S. QBO customers, excluding self-employed, up 11%. QBO advanced customers up 28%, while QBO U.S. Self-employed customers declined 14%, resulting in total online paying customers up 6%.
Second, we continue to focus on connecting the ecosystem. Online services revenue grew 19% in Q4, driven by payments, payroll, capital, and Mailchimp. For the full fiscal year 2024, online services revenue grew 21%, driven by payroll, payments, Mailchimp, and Capital. Within payments, revenue growth in the quarter reflects higher effective prices, ongoing customer growth as more customers adopt our payments offerings to manage their cash flow, and an increase in total payment volume per customer.
Total online payment volume growth in Q4 was 19%, relatively consistent with the range we’ve seen over the last several quarters. Within the payroll, revenue growth in the quarter reflects an increase in customers adopting our payroll solutions, higher effective prices, and a mix shift toward higher-end offerings. Mailchimp revenue growth was driven by higher effective prices and paid customer growth. The revenue growth continues to be impacted by the lapping of a larger benefit from price and lineup changes that we made last year in Q2 and Q3.
Third, we continue to make progress expanding globally by executing our refreshed international strategy, which includes leading with both QuickBooks Online and Mailchimp in our established markets and leading with Mailchimp in all other markets as we continue to execute on our localized product and lineup. On a constant-currency basis, total international online ecosystem revenue grew 11% in Q4 and 13% in fiscal 2024. Turning to Desktop. We successfully concluded the 3-year transition to a subscription model, which contributed to 25% Desktop Ecosystem revenue growth in Q4 and 16% revenue growth in fiscal 2024.
QuickBooks Desktop Enterprise revenue grew in the low 30s in Q4 and in the high teens for fiscal 2024. Our Q4 Desktop Ecosystem revenue growth also reflects the offering changes we made in early fiscal 2024 to complete the transition to a recurring subscription model. These changes resulted in approximately $60 million of desktop revenue recognized in Q4 and approximately $50 million recognized in the first three quarters of fiscal 2024, all of which would have otherwise been recognized in Q1 of fiscal 2025. We also expect approximately $50 million of desktop revenue that would have otherwise been recognized in Q1 in fiscal 2025 to shift to later quarters in fiscal 2025.
In total, these changes lower Q1 fiscal 2025 revenue by approximately $160 million and are largely related to a more frequent product update beginning in Q4 of fiscal 2024 to align the customer delivery experience to our subscription model. Accordingly, we expect Q1 Desktop Ecosystem revenue to decline approximately 20% for Q1. But for Desktop Ecosystem, revenue could return to growth in Q2. Overall, we expect Desktop Ecosystem revenue to grow in the low single digits in fiscal 2025.
Turning to Credit Karma. Credit Karma revenue growth improved each quarter during fiscal 2024 from a 5% decline in Q1 to a 14% growth in Q4. On a product basis in Q4, auto insurance accounted for six points of growth, personal loans accounted for five points, credit cards accounted for two points and Credit Karma money accounted for one point. Full-year revenue was $1.7 billion, up 5%.
We are pleased with the momentum driven by our relentless focus on what matters most to our members and partners. We made strong progress this year redesigning the Credit Karma app to enable members to see much more of their financial life and find the product right for them. We also introduced Intuit Assist to deliver personalized financial insights using data and AI, increased monetization in the underpenetrated point segment, and made it easier than ever for consumers to benefit from the Credit Karma and TurboTax product integration. I am proud of the progress the team made innovating on behalf of our members and partners.
Switching to Consumer and ProTax Group. Consumer Group revenue of $4.4 billion grew 7% in fiscal 2024 as we continue to revolutionize how taxes get done for consumers and small businesses. TurboTax Live revenue grew 17% and Customers grew 11%. Full-service customers doubled, while those new to TurboTax tripled.
We are pleased with the momentum we saw with TurboTax Live again this season. Turning to the ProTax Group. Revenue was $599 million in fiscal 2024, up 7%. In summary, I’m pleased with our continued momentum this fiscal year and our opportunities ahead.
Shifting to our balance sheet and capital allocation. Our financial principles guide our decisions that remain our long-term commitment and are unchanged. We finished the quarter with $4.1 billion in cash and investments and $6 billion in debt on our balance sheet. We repurchased $255 million of stock during the fourth quarter and $2 billion during fiscal 2024.
Depending on market conditions and other factors, our aim is to be in the market each quarter. The board approved a quarterly dividend of $1.04 per share payable on October 18, 2024. This represents a 16% increase versus last year. Moving on to guidance.
Our fiscal 2025 guidance includes total company revenue of $18.160 billion to $18.347 billion, growth of 12% to 13%. Our guidance includes revenue growth of 16% to 17% for the Small Business and Self-Employed Group, including online ecosystem revenue growth of approximately 20%, and Desktop Ecosystem revenue growth in the low single digits. Our guidance also includes revenue growth of 7% to 8% for the Consumer Group and 5% to 8% for Credit Karma. GAAP diluted earnings per share of $12.34 to $12.54, growth of 18% to 20%, and non-GAAP diluted earnings per share of $19.16 to $19.36, growth of 13% to 14%.
We expect a GAAP tax rate of approximately 23% in fiscal 2025. GAAP guidance reflects an expected $24 million restructuring charge related to the reorganization we announced in July. Our guidance for first quarter of fiscal 2025 includes total company revenue growth of 5% to 6%, including Small Business and Self-Employed Group revenue growth of 6% to 7%, reflecting the revenue shift in Q1 resulting from the desktop offering changes that I noted earlier. We expect Desktop Ecosystem revenue to decline approximately 20% in Q1 and the online ecosystem, which is our growth catalyst to accelerate to approximately 19% growth in Q1.
For Credit Karma, we expect revenue to grow in Q1 and for our Consumer Group and ProTax revenue to decline in Q1 as we are lapping the period a year ago that included the extended California tax filing deadline. GAAP earnings per share of $0.61 to $0.66 and non-GAAP earnings per share of $2.33 to $2.38. The GAAP guidance reflects an expected $19 million restructuring charge that we expect to incur in Q1 related to the reorganization we announced in July. You can find our full fiscal 2025 and Q1 guidance details in our press release and on our fact sheet.
I will now shift to our long-term growth expectations for each of our business segments. First, Small Business. With the momentum we see in online ecosystem growth, we are reiterating our long-term revenue growth expectations for the Small Business and Self-Employed Group of 15% to 20%. As this — as part of this, we continue to expect online paying ARPC growth of 10% to 20%, and we now expect online paying customer growth of 5% to 10%.
This reflects our shift in emphasis toward ARPC as we scale mid-market, drive growth in services, and reship how we go to market as one business platform to significantly increase adoption of all our offerings. While there are relatively fewer mid-market customers, the ARPC of mid-market QuickBooks Online customers is nearly three times higher than other QuickBooks online customers. Turning to Credit Karma. We are excited about the opportunity ahead as we execute our strategy to more deeply penetrate our core verticals, scale in growth verticals, and execute our consumer ecosystem strategy.
With the learnings from operating in the current business cycle, we are updating our long-term revenue growth expectations to 10% to 15%, reflecting the current size and scale of the business and as we focus on creating seamless end-to-end experiences with TurboTax that benefit consumers year-round. Finally, the Consumer Group. Based on the momentum we saw this season and the significant runway we have ahead to penetrate our TAM, we expect assisted penetration to be the key driver of future growth. TurboTax Live revenue accounted for approximately 30% of Consumer Group revenue in fiscal 2024, and we expect it to become the majority of Consumer Group revenue in the coming years.
With that context, while we are scaling assisted, we are adjusting the Consumer Group long-term revenue growth to 6% to 10% in this interim period with TurboTax Live revenue expected to grow 15% to 20%. One final note, before I wrap up. Starting in Q1, we will be changing the name of our Small Business and Self-Employed Group to Global Business Solutions Group. This new name better aligned with the global reach of the Mailchimp and QuickBooks platform and our focus on serving both small and mid-market businesses and our vision to become the end-to-end platform that customers use to grow and run their businesses.
