Intuit Inc. (INTU)

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Intuit (INTU)

Q1 2012 Earnings Call

November 17, 2011 4:30 pm ET


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

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

Matthew Rhodes -

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


Brent Thill - UBS Investment Bank, Research Division

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

Michael Millman - Millman Research Associates

Laura Lederman - William Blair & Company L.L.C., Research Division

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

Philip C. Rueppel - Wells Fargo Securities, LLC, Research Division

Sonya Banerjee - Jefferies & Company, Inc., Research Division

James Macdonald - First Analysis Securities Corporation, Research Division

Kenneth Wong

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

Jennifer A. Swanson - Morgan Stanley, Research Division



Good afternoon. My name is Sayeed, and I will be your conference facilitator. At this time, I'd like to welcome everyone to Intuit's First Quarter Fiscal 2012 Conference Call. [Operator Instructions] With that, I'd like to turn the call over to Mr. Matt Rhodes, Intuit's Director of Investor Relations. Sir, you may begin.

Matthew Rhodes

Thank you very much. Good afternoon, and welcome to Intuit's First Quarter 2012 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, our Form 10-K for fiscal 2011 and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit's website at We assume no obligation to update any forward-looking statement.

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.

With that, I'll turn the call over to Brad Smith.

Brad D. Smith

Okay. Thanks, Matt, and thanks to all of you for joining us. I'm pleased to share that we're off to another strong start in fiscal 2012. First quarter revenue was $594 million, representing an increase of 12% versus last year. Our Small Business Group led the way in the quarter, growing revenue 13%, making it the seventh consecutive quarter of double-digit revenue growth in Small Business. Across-the-board, our results are in line with our expectations and give us confidence to reiterate our guidance for fiscal 2012.

As you know, we typically report a loss in the first quarter of each fiscal year. The good news is our operating loss this quarter narrowed significantly compared to the first quarter last year, reinforcing the strengthening benefit of our ongoing shift to more recurring, reliable Connected Services revenue.

We're often asked how we continue to produce the kind of growth we've been delivering despite a volatile macroeconomic environment. The answer is simple, secular tailwinds, they're overpowering any cyclical uncertainty. We are well-positioned in capitalizing on the long-term structural shift in Connected Services.

We're seeing the impact of this structural shift in each of our businesses. For example, in Consumer Tax. The software category has grown 6% on average over the past 5 years, far outpacing any other tax prep method. Professional tax preparers grew a modest 1% and tax stores and manuals declined during the same time period. In Small Business, our online and mobile solutions are our fastest-growing services. We now have 300,000 QuickBooks Online customers, 300,000 Website customers, 200,000 Online Payroll customers and over 100,000 customers using our newer mobile solutions.

And in Financial Services, our mobile banking customer base has tripled over the last 12 months, now totaling 1.2 million end users. Intuit has another strategic advantage, 15 million installed customers. As the old adage goes, it's easiest to sell to the customer that you already have. And we're doing just that. We're enriching the mix as our customers rapidly adopt Connected Services. This generates the recurring revenue stream that I mentioned earlier, as well as favorable lifetime value economics for Intuit.

In addition, we're also benefiting as customers attach additional services and adopt more full-featured offerings that carry a higher average selling price. Let me share a couple of examples to illustrate the power of this favorable mix shift. QuickBooks Online comes with the recurring revenue stream and a lifetime value that is 20% higher than that of a QuickBooks Pro desktop customer. Posting 40% year-over-year subscriber growth in the first quarter, QuickBooks Online is one of our fastest-growing connected services.

In Payroll, the rapid growth in our Online Payroll solution, the increased success in attaching direct deposit and a favorable mix shift towards higher-end products are all driving higher revenue per customer. Combine these trends with customer retention rates in the mid-80s, and we have a large and growing Payroll customer base in which we can sell new solutions. While enriching our mix and maximizing our up-sell and our cross-sell opportunities are excellent leverage for growth, we're also staying laser focused on growing our categories by converting to nonconsumption.

Our teams are innovating in key areas and are striving to simplify our first-use experience for users, making it easier for new customers to get up and running on our products and services. This will continue to expand our categories and, over time, will convert millions of consumers and small businesses who do not currently take advantage of digital solutions.

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