INTU

Intuit Inc. (INTU)

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Intuit (INTU)

Q1 2013 Earnings Call

November 15, 2012 4:30 pm ET

Executives

Matt Rhodes

Brad D. Smith - Chief Executive Officer, President, Director and Member of Executive Committee

R. Neil Williams - Chief Financial Officer and Senior Vice President

Scott D. Cook - Co-Founder, Director and Chairman of Executive Committee

Analysts

Peter L. Goldmacher - Cowen and Company, LLC, Research Division

John Byun - UBS Investment Bank, Research Division

Kenneth Wong

Jennifer A. Swanson - Morgan Stanley, Research Division

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Raimo Lenschow - Barclays Capital, Research Division

Kash G. Rangan - BofA Merrill Lynch, Research Division

Gil B. Luria - Wedbush Securities Inc., Research Division

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

Kartik Mehta - Northcoast Research

James Macdonald - First Analysis Securities Corporation, Research Division

Ross MacMillan - Jefferies & Company, Inc., Research Division

Gregory Dunham - Goldman Sachs Group Inc., Research Division

Brad A. Zelnick - Macquarie Research

Michael Millman - Millman Research Associates

David Togut - Evercore Partners Inc., Research Division

Justin Furby

Presentation

Operator

Good afternoon. My name is Sayeed, and I will be your conference facilitator. At this time, I would like to welcome everyone to Intuit's First Quarter Fiscal 2013 Conference Call. [Operator Instructions]

With that, I will now turn the call over to Matt Rhodes, Intuit's Director of Investor Relations. Mr. Rhodes, you may begin.

Matt Rhodes

Thank you. Good afternoon, and welcome to Intuit's First Quarter 2013 Conference Call. I'm here with Brad Smith, our President and CEO; Neil Williams, our CFO; and Scott Cook, our Founder.

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, as well as our Form 10-K for fiscal 2012 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 this report 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. 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 Brad Smith.

Brad D. Smith

All right. Thanks, Matt, and thanks to all of you for joining us. We're off to a strong start in fiscal year 2013. We grew first quarter revenue 12%, and we're reiterating our guidance of double-digit top line and bottom line growth for the full year. You'll hear more on that from Neil in a minute.

The key driver of our performance continues to be the secular tailwind that we're riding towards a connected services economy, backed up by continuous innovation and strong execution. In the first quarter, our total Small Business revenue grew 18%, with 13% growth, excluding the benefit of Demandforce. Our Connected Services offerings are powering this performance.

Financial Management Solutions revenue grew 20%, with subscriber growth of 29% in QuickBooks Online, 25% in QuickBooks Enterprise and over 60% in Demandforce. Employee Management Solutions revenue grew 12%, with our Intuit Online payroll subscribers growing 20% in the quarter. And our Payments revenue, that also grew 21%, with customers growing 16% behind a strong adoption of GoPayment, our mobile payment solution.

As we shared at Investor Day in September, we have a refreshed approach to our Connected Services strategy to further capitalize on the structural shift that will continue the service growth catalyst for many years to come. Our refreshed 3-point strategy is grounded in first, delivering awesome product experiences. Computing devices have moved to the palm of our hands in the forms of tablets and smartphones, and we're increasingly focused on reimagining our products with a mobile first and, in some cases, a mobile-only design. A key success factor to winning in this mobile world is ensuring that we deliver an amazing first-use experience. That means our customers get the value they signed up for as easily and as quickly as possible.

The second key tenet of our growth strategy is enabling the contributions of others, while seeking to create what we call network effect platforms. By moving to more open platforms with ATI that enabled the contributions as end users as well as third-party developers, we can solve more customer problems faster and more efficiently for our growing base of end users. As an early example, QuickBooks Online can now be used by small businesses all over the world. Customers, wherever they live, contribute to localizing the product for the market in which they reside.

And our third core strategy is enabling data to create delight. In a world where we all have mobile computers in our pockets, with cameras, sensors and always-on access, our 60 million customers are generating incredibly valuable data that we can use to deliver even better products and to help them with breakthrough benefits.

This refreshed Connected Services strategy marks the next chapter of Intuit's transformation, and there's already real momentum behind it. For example, our mobile products are contributing meaningful growth. We've more than doubled the number of mobile customers in the past 12 months, with average user rating of 4.5 stars for iOS and 4.3 for Android. We generated $70 million in mobile revenue in fiscal 2012, which we expect to grow by more than 50% in fiscal 2013. And the good news is, our proven business models transfer well to mobile, with around half of our mobile customers being new to the franchise, which is expanding our market reach and our category growth.

This momentum is despite the reality that we do see in the macroeconomic environment. Our own internal indicators suggest the macro texture remains sluggish at best. Our October Small Business index reflected the seventh consecutive month of Small Business revenue decline, with Small Business employment levels on the decline since May as well.

While we're not completely insulated against these external challenges, we have proven to be resilient. Our customers need our products most when times are tough. Because we save them time and money on the things they need to improve their business results and their financial lives. As a company, we remain laser-focused on executing against the principles that have guided us through these choppy waters. At the core of these principles is customer acquisitions, which remains job one. At the same time, our teams remain rigorous in adjusting to external conditions, running our businesses efficiently and delivering on our commitment to shareholders, which you could see reflected in today's results.

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