Intuit Inc. (INTU) Earnings Call Transcript & Summary

The other question we're getting is where do you believe those customers, the low end, who leave TurboTax? I mean, where are they going? Is that the lower-priced aid providers, free filing options? Or do you see...

It's -- this business is incredibly competitive. And so the customers have a lot of choice to go to either another DIY. We also see customers that leave and go to assisted as well, right? Because of a life event or something that they've lost confidence in themselves being able to file their return. And so we see it kind of going in those directions. We have an opportunity to ensure that those customers know we're still new in the assisted category. We're known to be a software company. So we still have a lot of work to do to build our brand and the knowledge that our customers have of our full suite of products. We saw progress there, but we can do better. And then the second is we really need to ensure that we're providing more value beyond taxes. And that's an area where no one else can really do that in the industry other than us. No one else can actually get you access to the fast money, help you make better decisions with that refund, get you into investment vehicles that savings accounts or pay off debt like we can. And so that's where we have to really focus our efforts is making sure that those customers that are searching for assisted know that we're there and we can help them. Good progress, we can always get better and then really connect our ecosystem and our platform together so that we're constantly providing value beyond tax for those customers that are looking for value beyond tax.

So just to clarify that value beyond tax now that Credit Karma and TurboTax under you, that's where the potential is where you can bring value to those customers with Credit Karma.

Absolutely. And that's where we saw really great momentum this year. We grew -- we had 54% growth in customers that actually started their tax journey in Credit Karma. That's 25 points higher than the year before. And so we see the power of the consumer platform actually starting to come together.

Right. And other topic on AI displacement concern, like Sasan has always been saying that Intuit is an AI beneficiary and not a victim of that. And did you see any kind of filers switching to any DIY kind of solutions? Or did they use ChatGPT file somewhere else? Any kind of data you think you have seen?

I think we see the traditional players that's right now where they're going. We do see some of the new AI start-ups, but not at scale right now. Our customers, and we believe that there is very -- that we need to be where customers are going. And so we see people interacting with ChatGPT. We see them interacting with Claude asking their questions, either when they're in session with us or they start there. And we've embedded our experiences into both Claude and into ChatGPT. And we're excited about what we learned there. So we will continue to do that. The other piece that we've shifted and we have seen the shift from SEO to GEO. And we were early on in that migration, and we really saw great momentum there in terms of our content being referenced and being able to also do some work within those LLMs. So for instance, in ChatGPT, you could actually find one of our service centers and actually schedule an appointment with a tax professional in the embedded flow of ChatGPT last year. So we're meeting customers where they are. We're enabling them within the product also to connect. And then we also have our own digital assistant that we deployed last year, and it drove 15 million interactions and over 1 trillion tokens consumed there and drove a higher conversion rate as well. So it drives confidence within the embedded product. What's really important in tax and I think in personal finance is you have to be very deterministic. You can't -- it has to be -- compliance is important. Your money and your outcomes for that money is very important. And so we believe that we're uniquely positioned to both engage and embed as well as deploy those capabilities directly into our products and help customers make the right financial decision.

Right. I want to drill a little bit deep into this integration with OpenAI. It was, I think, middle of the tax season, you announced that -- help us understand like what you achieved so far. But as you think about in the future, I'm pretty sure your team must be working on, do you see ChatGPT as another funnel to get more? Or is the experience that at the ChatGPT, you can get your tax done. And when ChatGPT is doing that, it can leverage your Intuit LLM or SLM, you can say. What's your strategy? How are you thinking about that evolving the ChatGPT?

So it's definitely going to be a funnel, right? GEO is here to stay. Customers are going to start there and ask questions. And so we want to make sure that our content is showing up that we're referenced and that they can easily connect into our products. We did deeply embed certain components of our product into OpenAI and Claude this year. And we learned a lot. It did not provide a lot of outcomes for us, right? Still super early. Customers struggled to connect accounts within the LLMs. That's not unique to Intuit. I think that's just in general. And so we're exploring and continuing to iterate with them. We're very pleased with all of our partners across Gemini and our relationship with Gemini, ChatGPT and Claude as well, like we are very much embedded and working through different iterations for both personal finance and for tax.

One question I always get here is that, yes, OpenAI or ChatGPT or Claude, they don't file taxes. They just can answer your question, all that. But there is another breed of tools they're building on top of this OpenAI or ChatGPT with the API. But as you see those kind of emerge, what will be their business model? Are they going to charge? Are they going to pay? Because you also use AI too. So what do you think like in next 2, 3 years? I mean, this year, we didn't see that many. But as we see next few years, let's say, more AI-based tools evolve, what will be the monetization strategy? Because they have to pay for tokens.

Yes. I think the monetization strategy right now for us is we have to focus on the what drives the best experience, what drives efficient experiences and then how does that lead to conversion and consumption of our products. And what we see right now with like that digital assistant as an example, is it consumed a lot of tokens, but it made us more efficient in our call rates into our call centers and it drove conversion impact. So it's worth the investment for us to help our customers navigate confidently, not have to call and have a higher conversion rate. And so that's how we're thinking about it. When you look across our assisted category, we believe it's an incredibly large opportunity to drive more efficiency and transform that experience away from data entry into advisory. So where the systems do most of the work, ingest the data, apply their content to the tax return and then provide advisory recommendations to the expert to talk with the customer through. And so that's a big shift and will allow us to actually serve more customers and drive better efficiencies in that experience, which will then allow us to be aggressive on our pricing.

Since you lead the TurboTax group, I want to ask this question, how is your product changing with AI? Are you -- I know you have been historically, you have seen TurboTax change a lot. Questions, rule-based. Now are you leveraging AI? So your next future TurboTax product will be as good as some of the competitors may be on top of LLM?

Yes. It's -- TurboTax historically has been built on an interview, right? The interview was the big breakthrough that we invented, and that was just a workflow. This year, we enabled about 90%, it's actually 93% of forms consumption and application -- automatic application through LLM-based models. So we would go get the document, translate all the information and apply it to the return. And that allowed us to remove the interview. And so that's really by the end of tax season, our new customers, we're not really seeing an interview process. They were seeing an AI-first experience. Data was collected, applied and then next best actions were recommended versus forcing a customer -- and I say forcing, but giving a customer an experience of a very long interview. So we've embraced AI, and we had to change our whole product underneath that in order to enable it. And we did that by first peak last year. And so by the end of tax season by April 15, it was an AI-first experience. Our digital assistant was there as a side car. We loved what we's saw with our digital assistant. You can start to see how we will explore opportunities for us to be even more conversational in our experiences with our customers and will enable us to truly go to the next level. But the interview for the most part is behind us. And that's a big change because the interview launched our business in TurboTax.

The reason I asked that question is if you offer AI-based solutions, somebody else, but it comes to the cost. How can you monetize that? So I want to dig into your opportunity because now Credit Karma is with TurboTax under your leadership. So where do you see the opportunity? Let's say, you try to address this low end offering free competitive solutions like that. But it's ultimately the ARPU that matters for you. That's what drives your growth. Yes. One part is you talked about last year, early refunds. -- early refunds. -- that one. First of all, how did -- how was that this year versus last year?

Yes. We had -- we delivered $25 billion of early refunds to customers this year. So it was very successful for our customers.

Okay. And then what are the other opportunities that you can monetize this base, right? That's the story of I think, Center for Consumer Finance. That was the vision when you acquired Credit Karma.

Yes. And so we think of it as really jobs to be done across the consumer platform. So for, let's say, the under 50,000 customer base, a large part of those customers are just starting in their credit journey. So this year, we've launched an early thin file, no-file product within Credit Karma, where customers can actually start their credit journey. That's usually where your financial journey starts. I need to start building my credit. So we have that. So that's one job to be done is building and managing your credit. Another job to be done is your money in and money out, right? So we have Credit Karma money, which is allowing customers basically a banking experience all digitally delivered that enables them to get access to money through -- fast access to money through their paycheck advance type products. That's also started to get traction. The reason why I start there is those jobs are happening every day, all year round for that customer segment. When they do and start their credit journey with us and we engage with them year-round, we will have the data and information for them to complete their taxes during tax time, and it won't be -- it will be more natural for them to stay within our product. We see that where our customers that -- our credit customers, they've consumed one or more products within Credit Karma, their loyalty within the tax product is higher. And so building that -- those onboarding opportunities through credit, through money, through personal finance decisions like debt consolidation, those are all capabilities now that we have within Credit Karma. We engage with those customers, solve a big problem that they have, build a relationship with them. And then when tax time comes around, it's a very natural progression to get their taxes done within our consumer platform.

Yes. That sounds like the strategy of your competitors who probably took away some of your low-end customer. That's how they're monetizing offering free tax.

Yes. We see that emerging more. That's just still early, but we definitely see that as an emerging competitive play as well.

Okay. Then another question going back to the live side, which is doing well. But how do you think this AI is going to change, whether it's monetization, whether the ARPU or even improving your -- in the margin or efficiency? How do you...

Yes. I think it's all of the above. It definitely will help us scale our business. No question about that. It's going to change the way that service is delivered. Service up to this point has been workflow-oriented, not advisory oriented. And so that change is happening where workflow is being automated, data in, data attribution or content attribution, completion of a tax return, all being automated. You throw the human element to drive the confidence and the advisory services. And that's how we see our assisted business. That allows us to be very disruptive from an experience standpoint, from a pricing standpoint and from an outcome standpoint as well. We can start to shorten the cycle from a customer starting their return to finishing their return and getting their refund pretty significantly, and that time to money is very important for consumers.

Okay. Probably last question under your leadership, Credit Karma, I think 19% growth against such a tough comp. Phenomenal job. Doing well. But TurboTax Live, you have challenges as well. Like next 1 year, until the next tax season start, what's your focus going to be?

Yes. I think it's going to be in 3 areas. One, we've got to continue our momentum in assisted tax. That's the $88 million that you referenced before. And we're still very early in that stage, and we need to continue to grow share there. So you'll see a lot of focus on that. You will see us focus on our DIY business and building new ways for us to serve customers in the consumer platform, which connects into the Credit Karma. And what we're really focused on now is creating the services and products that allow us to engage through our consumer platform to allow us to engage with our customers every day. They're making decisions on where to spend their money, on how to save their money or how to invest their money. And our platform right now can do all of those for a consumer. And you will see us driving much more engaged experiences, which will help solve money problems or the money questions and jobs, the personal finance jobs and then ultimately lead to a done-for-you tax experience that is less stressful and better outcomes and faster for you.

Yes. We always think fear and greed drives people pay for tax because you want to maximize your tax return, and you don't want to get audited by the IRS.

Exactly.

Hopefully, you'll continue to do that and customers will keep paying you. Thank you so much for joining us.

Thank you, Siti. Appreciate it.