Intuit Inc. (INTU) Earnings Call Transcript & Summary

Welcome to our next session. The -- very happy to have Marianna here from Intuit.

It's -- let me start big picture. So like you had a kind of long career in the Valley. And then -- and I think people don't quite appreciate like how much you've been involved in all the big technology trends. So maybe as a starting point, can you just kind of talk a little bit briefly about your kind of career stops and kind of what you learned there?

Sure. Thanks, first of all. Thank you for having me here, and thanks for coming to the session. Yes, you're right. I've been in the Valley for quite some time and I had a chance to span multiple things that's been happening, but maybe a few a few stops that are worthwhile mentioning is one is being involved in consumer electronics and trying to do devices at the beginning as part of a company called General Magic. The company actually wasn't successful. There's a documentary though on the company because all the smartphones today came from that source, either Android or iPhone came from people that actually worked at General Magic. So I had an opportunity to work there. I had an opportunity to be at Ariba, which is an enterprise software at the time, the biggest Java application around, first to go HTML, kind of web interface, SaaS transition, so being part of that. And then I've been part of VMware, which is an infrastructure company and the whole virtualization revolution there. And then I was part of like then the next phase, which is in the cloud and Docker, which is a developer tool, open source, et cetera. And then the last 7 years, I've been at Intuit. I actually started in engineering, and I was Intuit's CTO for almost 5 years. And now I'm on the business side and I run our global business solutions group out at Intuit. So yes, quite a few stops there.

And how does the technology understanding appreciation that you kind of developed over your time, just helps you like in your current role? And like we think QuickBooks, we think like, yes, it's easy accounting, how difficult is it? But like we have so many changes in the industry, like how does it help you -- how does it have that technology background help you think about QuickBooks and maybe think it differently?

Yes. I would say, at the end of the day, when you think about Intuit, so we do sell financial products, if you want, for small businesses, for consumers. But at the end of the day, we sell products. It is all about technology. It is all about selling software. So this is critical, understanding of technology, how to build it, how it's being built well, how can you innovate fast. And I think even more so with AI and this next phase of changes, the ability to fully understand what does it mean and how you're developing the product, what trends are interesting, are not interesting for you? Which one should you jump on and how to go about it? What is the kind of talent? And even simple things, when I sit down with the team, and they'll give me an estimate over something and I can call them up and I don't think it's right. Oh, you can do it much faster and how would we do it this way. So even that on a day-to-day basis, can actually be quite helpful.

And then like if you think about that journey around QuickBooks because you had to -- you've been through almost all the technology trends, with like QuickBooks Desktop and on-premise and QuickBooks Online came. Now we're kind of trying to weave AI in there. Can you talk a little bit about that journey of how the product evolved?

Yes. One of the biggest strength Intuit has is the ability to disrupt itself. And you're right, we started as a desktop product and then moving to the cloud, and being able -- first of all, moving to subscription, moving to the cloud. All of those were distinct moves, then integrating with mobile, moving to AI. Each one of these changes have been significant changes. And obviously, the I think is still in play for all the industry. I think what is key for Intuit aside from just having good technologies and good base is also the ability to really disrupt ourselves. And we just, as an example, we're like have this mechanism in which we look at these things. And once a year, we do talk about our long term and look -- take a critical view at that. And big decisions could come from it, like hey, we need to do something meaningful from -- with AI. Here's the kind of things. Oh, we have maybe like big bet, it's part of our -- the way we run the company and the ability for us also to just go for it and disrupt ourselves is -- has been really playing well for us and being able to make these bold moves.

And then I'm going back to when you were like [ CQ ] as well, looks like part of this -- and I wanted to talk about your AI journey a little bit, but part of the reason why you're so well positioned is that you guys kind of, I want to call it like clean up the house or disrupt it yourself to kind of go to AWS, kind of a general like have an AI platform. Can you talk a little bit about that thinking? It's like you were kind of way ahead of a lot of your peers or like Salesforce is trying to do it now only. Like can you talk about that period and what the thinking was there?

Yes. And thank you for that because that's -- obviously, I'm passionate about this. I can talk for a long time about it. But I would say some of the big -- while I was a CTO and some of the big transitions we have made is like we have a strategy of being an AI-driven expert platform. And almost every word in there matters. I will start from the last one, which is a platform and really taking the -- what I've had a chance to do is, first of all, move out fully to the cloud because when I joined, we were not quite there. The second thing is really thinking about ourselves as a platform and really articulating what it means, what are those capabilities. In fact, if you would be into our investor conference, and even if you saw some of the presentations, even a couple of years ago, we started to talk about this idea of the City Map, like really articulating what is the platform, what are the capabilities that we need, building everything as a platform, AI-driven expert platform, so we're now an expert. The ability to really provide expertise in like TV Live, [ QB ] Live on our platform, have human and AI and data and everything come together effectively on our platform and building this as a platform. So I'll give you a tangible example. We started with TT Live, but the capabilities, what we call our virtual expert platform, we build as something horizontal that allows us then to take this idea of human expertise and make it available to our customers in our software throughout our portfolio. So then we continued with QuickBooks Live. And now we're able to do things like full service. We're able to offer more expertise. We can onboard expertise easily. So building this as a platform has been a game-changing for us. And if I go to the first word, which is AI-driven expert platform, so let's go to AI, investing in AI very early on in multiple ways. A lot of it has been, we need to bring the right talent on board and making sure we have really strong AI expertise, AI center of excellence, understand this in-depth, doing some research on going after bold ideas out there. In fact, we were playing with GenAI and had GenAI expertise before it exploded in the industry. So when it's kind of exploded, we're like, "Oh, we totally understand it." We were already playing with deep learning, with generative AI, so we were kind of pretty primed to take advantage of it. And then you're right, we also build that part of the platform. And very early on, we announced something called GenOS, which is a proprietary generative AI operating system, if you want, for our software that allows us to create GenAI, consume LLM, create GenAI experiences very rapidly and allow our developers to really develop GenAI effectively and safely and with privacy for our customers at the company. Twice a year, we do this kind of hackathon, and we just had one several months ago, and the number of ideas and innovations that came from it with the ability -- with GenAI were actually mind-blowing. And the ability of our developers to play with what we call GenStudio and develop -- as part of GenOS, developed GenOS experiences rapidly is a game-changing for us. In fact, some of these experiments that they have done were like, wow, there's there, there. Some of them are deployed, some of them are being experimented with. And we believe there's a lot of there, there even for the ability to innovate rapidly in this method.

And the -- and I apologize for the question, just more on a practical terms, so if I think about QuickBooks now and QuickBooks going forward, how do you -- how should we think about AI feeding in there? Like I get the live platform thing, it's fine. But like how is AI helping me like from -- what's your vision there?

Yes. So we use AI and we'll continue using AI in multiple ways. But let me just give a concrete example and also talk about things where we see that going a little bit. First of all, in the product itself, we already have a lot of AI, AI-infused experiences. We have it in our platform. We have it in our expert platform where our experts -- just to match experts to customers, which sounds easy, but when you start thinking about it, there's actually thousands of attributes that you have to match between an expert and a customer to try to match them correctly, to try to slot a time that they can use like. So like AI, AI, AI, cash flow prediction, AI, AI, AI, so like everywhere. There's a lot of AI already. Also, as we develop software, we use a lot of AI internally. So for our software developers with like all these AI-generated codes. So AI gives us productivity internally. It is infused in the product. We just released GA Intuit Assist. So let me talk about the product in QuickBooks. So we have Intuit Assist as our brand name and our as a way to make generative AI and AI experiences available to customers. We just released several features as part of that, that we've been working on for several months, and this is to really make sure we understand the benefit to the customer with it and that they're ready. But just as an example, one of these features is ability to like take a photo with your device of any paper scratches and turn it immediately for -- I'm really excited about this, for an invoice, then make that invoice easily pay-enabled, send reminders and make sure -- like being able to do reminders for this invoice, give the user the ability to change the tone. So we were like, hey, this is a customer I want to be a little bit more...

Friendly with or unfriendly?

Unfriendly with. And so the reason I'm excited about this, we've been experimenting like -- at the beginning of like, "Oh, yes, GenAI, let me just do reminders" and like, but we were able to experiment this in a way that we actually see that customers that use that, their invoices are paid 45% faster. This is mind-blowing in terms of the time is money. So in terms of the benefit for our customer, this is mind-blowing in -- this is just one feature. And we'd like to do more and more and more of that. And now we released this GA just like several weeks ago. So we're excited about that. We announced revenue intelligence as part of Mailchimp, which is the ability to say, "Hey, let me help you find revenue," and we're going to continue to invest in that. But we're also very heavily working on and experimenting with agent technology. Some of it we're already using. It is really allowing the LLM to do orchestration. Sorry, for being a little bit technical here, but we are seeing even more automation and even more done-for-you experiences that we will do for our customers. We already -- again, we already have some experiments in the market, and we're super excited about that. So net-net, what we -- if you ask me, where do I see that going? We are going to -- we're already using AI. We're going to continue to use AI to make our products even more innovative and create more done-for-you experiences in our products tied to benefit. And our benefit, what we're going for is more money in their pocket, no work, so less work on their behalf and then saving them time.

Yes. Perfect. No, that's good. I mean that's why I'm glad that you were here with us because you have the tech background, so it was like who else -- who is better to talk to. Shifting gears a little bit is you moved -- you worked for many years on the tech side, now you're on the business side. And so now all of a sudden, it's like here is the QuickBooks franchise and keep growing. Like so when you started looking at that, like what -- from your perspective, like what are the big growth levers for that?

Yes. So -- and in my background, I do have some previous experience. It's not like I'm completely -- but what I would say is that, at the end of the day, we do want to lead with product and innovation. So at the end of the day, what we want to do is continue to innovate, have better and better products that are out there, move ahead of competition and continue to go after product-led growth, which means that it's with your innovation, it's with the customer being able to discover more product within the product. It's with their ability to get onboarded and get benefits very quickly from what you're releasing is that how we're going to grow in terms of like the base that we need to have for -- this is the fundamentals for our growing. So it's all about product, which is why I believe my background is so useful here. But of course, like on the go-to-market side, there's a lot that we need to do, like we're positioning ourselves more and more as a platform. We need to make sure that story is well known. We need to make sure that when we sell, we sell a platform. We actually moved from completely having inside sales to how we -- when we go to market, we now have sales function, and we're starting from -- to use it for go-to -- for mid-market go-to-market. We now have outside sales, right? So we used to have just inside sales. We built a sales function. We started from 0. We have 200 people right now in sales, full sales organization and understanding of what is the go-to-market motion for mid-market and then scaling it. So those are the kind of things we need, and over time, establishing more channels. So there's quite a few things we -- I am planning to do on the go-to-market side to continue make sure we have growth, especially as we talk about larger customers in addition to product innovation. The go-to-market is always an aid to like making sure of how you take it to market. It can never replace really solid, great product with great innovation.

And then how do we think about the opportunity available for you? Like the easier one, and I want to touch it a later, would be QuickBooks Advanced because there's like a massive opportunity in that space. But in the core QuickBooks space, like, let's say, the 0 to 10 or 20 employees, what's -- I mean, you have a very high market share. Historically, we talked about like, oh, yes, but 40% is still Excel. Like what's the opportunity there that you can go in terms of new customers or gaining new customers? Is that still like a lot of Excel? Like how do we have to think about that?

Yes. We count our overall TAM, like the way we think of the pyramid. We think about it as $180 billion total addressable market. So this is by the TAM. Like if you look at that, and you start slicing it, you would see that about half of it is kind of SMB and solopreneurs. And I think it's roughly half and half there, a little bit more SMBs, would be 40-50, if I remember correctly. And then actually, half of it, almost $90 billion is mid-market. So first of all, in terms of how we think about customers, we definitely need to go for like the higher, the bigger customers, the mid-market customers, those that have more employees, that have higher revenue, that have more complexity. So that's kind of one. Now if you start looking at what they're all using, to your question, and start breaking this apart, we do see, surprisingly, a lot more nonconsumption --a lot nonconsumption, spreadsheets, like a little project management tool that they're also using to manage their books, et cetera. So we still see that a lot. But interestingly, what you would find is that they have point solutions or that do they have multiple solutions. And maybe they have pretty much a lot of it is covered, but it's not working as well together. And they've been increasingly telling us like, "Hey, we want one solution, and can you actually make it easy for us? I'm tired of aggregating 40 different softwares to try to run my business." So this idea of like one end-to-end solution, and that is increasingly important for mid-market. So often, what you would find in the mid-market is a hodge-podge, is like have some solutions for some things, I don't have for others, and then they are also not working beautifully together. And this company is also surprisingly write a lot of software themselves or contract somebody to write them. I was just meeting with a customer the other day, and they're like a big franchise. They have multiple like -- and they are like telling me, "We're writing a billing solution." I'm like, "You are? We have a billing solution. Why are you doing that?" So like you do? Like, let me show you, right? So we see a lot of that. It's a hodge-podge of a little bit themselves, a little bit like spreadsheets, like hack, and that's where we see an opportunity across those 3, but in particularly in the mid-market.

Is part of that the -- because like I've been covering you guys now for 14 years as well. The -- and moving up market was always like a discussion point. It seems more real this time. Is it like the product maturity and product breadth got better, and so now you can actually handle that space better? Or how should we think about that?

Yes. Obviously, it's been a process. We declared this like 5 years ago, it was like, hey, part of our big bet is disrupt the mid-market. So we started working on it. We introduced QuickBooks Advanced. By the way, I was the engineering either in QuickBooks when we did that, so I always remember that from that angle. And then we offered more and more robust services with payroll and payments, but yes, over time, it allowed us to build even more. And what we announced a couple of months ago is something called the Intuit Enterprise Suite, which is a more robust offering designed for the mid-market, designed for more complex businesses, gives them more of like a view across the business, provides them with new capabilities that we didn't have before, like multi-entity and some advanced reporting, project profitability that allows them to see their profit over time. We attach that a go-to-market motion. Like I said, we hired 200 salespeople. We're scaling from there. So yes, we're like everything that we have done so far allows us to take one more leap, the next leap forward with more robust offerings.

And talking about the next leap, Mailchimp. So all of us were kind of a little bit surprised when you bought it because it was like, it was a good, big franchise, but we felt like, yes, but it's front office, you guys are back office. How do you think about like Mailchimp going forward?

Yes. Actually, what you said there is exactly the reason why we bought it. When we go to our customers and we ask them, what is your biggest problems? We want to be the financial platform. We want to be the platform for you in which you run on every single day. So they say one of their biggest problems, actually #1 is get customers. So when we declared that big bet to be the center of small business growth, we wanted to see -- we wanted to add a component that allows customers to get customers. So we looked at multiple ideas, and we liked Mailchimp because this is really at the heart of customers going in, interacting with their customers, getting customers, doing marketing to their customers. So that was really the reason that we bought it is to make sure that we have a complete portfolio. And we've been integrating it since. We also had to go back and do some work to make sure that business is fully healthy and everything that we need from that. But if I take you in the future, again, think about this end-to-end platform and think about the biggest problems that our customers have, and we want to do that. We want to be the end-to-end software, the end-to-end tool on which these small business and midsized businesses rely on every single day to run and grow their business. That's our goal, and it is across the jobs. So we mapped, and I think I would mention that to different people in the meeting, we map it to the jobs to be done, what is your biggest problem -- we asked our businesses, what is your biggest problem? What do you need? We map the jobs to be done. We know exactly what are the portions of this job, what are the sub-jobs of these jobs? And our idea is to be that end-to-end for these customers. And there's a lot of benefit of being the end-to-end is because when it all runs together, they have full visibility and they can really run and grow their business effectively. I'll just give you an example because we talked about it in the room. We're just working on something that we are now starting to release called Tap to Pay. It's the ability to use your phone to -- as the registered, as the -- instead of like having a separate hardware, you can use your phone to be the place where you accept payments. We know we can pay with a phone, but this is to accept payment with the phone. So imagine you have like, I don't know, like somewhere you sell, you have in the store, you can have people around basically taking payments from customers, and you can have multiple people in the room taking payments. And real time, the second they take payments, you can immediately see...

[ Anything ], yes.

Exactly. What does your balance look like? You can immediately kind of tie your business end to end. You're going to have to say, "Oh, I'm going to back at the end of the day, at the end of the week, at the end of the month, I'm going to try to reconcile it." You immediately understand how your business is doing. This is massive. So this is what we really want to bring to our businesses is that end-to-end capability.

The -- I like the vision, like -- sorry, then like I have one question on that one. Like -- but if you look at Mailchimp, where are you on that product journey? Because like if I look at the growth rate, if I try to get in it, the growth rates are not suggesting it yet. Like how should we think about that?

It's one of the things where we can say we're constructively dissatisfied with some of what we had to go and do. We did see like growth rate for our mid-market, 13% more customers on mid-market this last year. So there's a lot of things that we are happy about, but we did see higher attrition in like smaller businesses. The product got -- we lost some focus on it. So we have to go back and fix that. Where I see that over time is as a tool to enable our customers to actually have a CRM being able to see their customers, being able to see of where they are and being able to reach out to these customers, and market to them and sell to them. And like I said, integrating it into our flow. We actually have a lot of things that we're working on that we are hoping to share with you all in the coming months with like actual demos and things that we can share, but this is active work. And yes, we had to go back and we had to make sure that we also like have the right people in place, that we have the right software in place, that we fully move to the cloud. There's some things that we had to go back and make sure that are in place. The reasons behind this acquisition, the motivation is still there, and we're still very excited about it. And we still see that as part of that end-to-end platform. In this case, again, imagine, I see a customer, they're not engaging. I can send something to our customers. I can find more revenue. They can go and purchase for me. I immediately see that in the books. I can hire more employees. If I need to, I can take a loan to bridge, if I need to -- all of it all in one place, that end-to-end visibility is massive. And being -- understanding where your customers stand and marketing to them is a very important part of that.

I can imagine it. That's a great closing statement as well. I really enjoyed our conversation, time flew buy So we are kind of...

Same.

That was really nice. Thank you.

Thank you.

Good to have you.

Thank you all.