Conference Transcript - INTU 2026-06-09

Operator

All right. Hi, everyone. Welcome you to this Mijio Technology Conference, and it's a pleasure to host Intuit. And we have Mark Notoriani, EVP and General Manager, Consumer Group. And those who don't know, Consumer is the big one. It's TurboTax and Credit Karma, and Mark leads both the one.

Mark Notarainni, Other

That's right. Yeah.

Operator

Welcome you to the conference. Thank you. Thank you for having me. I appreciate it. You know, the topic du jour is TurboTax. That's what we're going to focus on, but we'll do cover Credit Karma. Just, I mean, in your recent Q3 results just came out, you talked about weakness in the tax business, TurboTax business, and in terms of your expectation for the fiscal year, you lowered it to 7% from 7.5% to 8% previously.

Mark Notarainni, Other

Let's start with your puts and texts of the tax business. maybe i'll start with uh with what worked and then maybe i think the takes are uh what didn't work well for us this year what we're really excited about um right now is our continued growth in our assisted category you know we grew 38 in customers 36 revenue growth and that's a really critical category for us it's the category that we're newest in and it's the largest category in all of tax it's actually um it's the the large it's seven times larger uh than the diy uh category itself sorry this is um and so we're we're very excited about our progress there too um we're really um starting to emerge as a consumer platform we grew uh our TurboTax customers that started in Credit Karma, 54% this year, that's 25 points higher than the year before. And the reason why that's very important for us is because Credit Karma and that platform gives us an opportunity to serve and grow with our customers year-round versus the two times a year that we get to interact with them on a tax business. And then finally, there are two other things that we're really excited about. One, our growing and continued focus on money. Money is at the core of the whole tax product, right? It's the largest refund for many customers. And we continue to see growth and adoption of our fast money products. And that also starts to establish a bigger relationship with our customers year over year. And then we're very excited about ai ai has truly changed our product from the way that our customers start and to how they use the product throughout the course of filing their taxes and i'll give you one example of that our digital assistant this year was a hundred percent generative experience that drove 15 million interactions with customers had an index a contact rate that indexed down in the mid-70s. So customers are engaging, filing their taxes, and not having any friction in having to stop and call our call center to get help. So we're very, very excited about what AI is doing for us. Now, the takes side, you know, I'll start with the biggest challenge we had this year is the IRS category did not materialize the way that we have seen historically. Historically, Currently, the long-time CAGR of the IRS category is about 1% growth each year. This year, we believe it's going to contract 30 basis points. And then underneath that, the e-file growth is about half of what we normally see. Our long-time CAGR on e-file growth is about 2%, and this year we expect the e-file growth rate to be about one percent so both of those things combined really impacted the diy business more than any business and we're the category leader in diy so it was a a big impact on our our year this year and then the second thing and more in our control is how do we serve um customers at um that are under 50 000 uh and uh and specifically the value seekers within that category where they're very sensitive to the pricing of tax um and um and and that area is a very um it's a high churn area in the industry itself and it was high churn for us and we need to reestablish our experiences there across our platform to make sure that they get their best tax outcome, but they stay with us long-term.

Operator

Okay, I mean, that's a great detail. We'll definitely talk about the part that worked well, TurboTax Live, but I want to go through the part that didn't work. First, you talked about, let's go to the IRS filing. It was down 30 BIPs, usually 1%, And I think you talked about this is like 2 million units. That is the most significant industry-wide contracts and probably post-COVID. To start with, why did you see from an industry perspective this past taxes? Why do you think this happened, this occurred?

Mark Notarainni, Other

Yeah, we're still researching and ensuring. The season's not over yet. The season ends actually October 15. so we need the whole season to mature and we need to spend the time between now and then really researching why this happened. And we just don't have that answer yet, but it was definitely an impact that we saw across the category.

Operator

Okay, and then other part is the e-filing business, I think which you said 1% growth.

Mark Notarainni, Other

I think that's another area investors were thinking that is kind of a good growth kind of exploration there so what's your exposure there you know in terms of total returns including I think there is manual part also there you can do manual and do e-filing so help you know yeah help us understand that yeah so over over the years there's been a shift out of paper returns manual returns and into e-file and e-file did grow this year are we expected to grow even uh one point uh by the end of tax season um but historically that growth rate has been two uh two percent um and so um what uh we anticipated was a reduction in paper returns that would shift into um into software uh diy uh and and and that just did not materialize this year. There were some regulatory changes on how funding gets done, et cetera. We're exploring all of those, but we just need to see the season fully materialize to understand the full impact. But our projections right now that we look at is a contraction of 30 bps overall, and only one point growth in e-file versus two that we expected.

Operator

If I switch to the TurboTax live, that's a pretty strong growth 36% revenue growth against 47% growth year before and now it's almost 51% of your TurboTax revenue as a solid that's a growth you're part of the business help us understand what's helping you you know seeing this kind of momentum you know last year what are the drivers what's working and what still you need to work well yeah that's a so there are three things that are really working for us right now in Assisted.

Mark Notarainni, Other

One, it's a really great product for people that want the assurance and the confidence of an expert. And that shows up with our current customer base in DIY that have a life event and require the help of one of our certified experts to help them through this tax year or or it's a fully assisted experience and that manifested itself this year in our local distribution we opened up about 500 plus service centers around the country what that unlocked is the digital footprint to be able no oh there we go so the local expansion that we drove allowed us to attract previous year assisted customers that we had not historically won before because the decision on taxes for the assisted category is very much driven by who's next to you and who's close to you and understands your tax in your area so that expansion really helped us acquire more customers and we saw significant new acquisition through that channel and then the the the the third piece in assisted is we because we are built on a technology platform and we have AI plus our artificial intelligence plus our human intelligence actually on the same platform it allows us to scale more efficiently which in turn lets us have a very aggressive price point and so when we started this journey last year we said there were three things that we wanted to do we wanted to compete on an experience yeah we wanted to be faster than anyone and we wanted to do it at the best price point and faster was not just actually finishing the return but actually getting people money fastest as well and so that's the those three things came together and gave us a really good foundation to start to be more disruptive in the assisted category now you guys always talked about this you know branding local strategy product you know these are the things you have to do to get into the market.

Operator

When you look at the TAM for live or the assisted part, that's a massive market compared to DIY. 87 million tax filers in that space.

Mark Notarainni, Other

Still file, yeah, and assisted, yeah.

Operator

That's still you have to penetrate, and then 15 million probably go to out of that, go to the tax store.

Mark Notarainni, Other

So if I may ask, where do you see the traction right now? is it within that 15 million tax store where people are you know that's an easier one to capture or is there 87 million and other other remaining yeah it's a great it's a great question and i would say there are are really two uh two answers to that one um in the assisted category overall there are about 14 million people that switch every year they whatever whatever form they were whether we're in a tax store or an independent tax professional. And so those are opportunities. So that's really a big area for us, those $14 million. And then the rest is a little bit of a mix of tax stores as well as independent pros. But it's much more what we're seeing is the idea of our experience, our price point, and our local presence that's unlocking us serving both tax stores and independent pro company customers. And then the third area for us is the expansion into business tax. It's opened up a whole new category to serve customers where we haven't been before. And those small business customers that we're attracting right now tend to be at the small end of the small business either newly formed or small and they file their business tax and their personal tax together and so when they make that decision of who's gonna file their their business tax the personal tax comes along with that as well so it's another area for us to grow yeah I mean if I look at the live your TurboTax live it has live full service business tax yeah and then live itself is there a way to you know discuss or you can talk about the growth of each of that site within that site we usually don't we don't we talk about it

Operator

live at the at the overall category good try though but yeah we are the reality is we're growing across all three yeah and and each one provides a distinct value to the customer that's looking for that type of service but you still feel comfortable with your strategy that you I think you talked about 17 to 20% TurboTax live growth at the investor's day so you still feel comfortable.

Mark Notarainni, Other

We're not we're not we're not changing our long-term growth.

Operator

Okay okay so if you look if I look at the business 51% of that live growth growing at this point let's say 17 20 you are not changing but the question next comes is that how can Can you at least stabilize the DIY, other part of the business? Because if you can maintain that business, right now, in our estimates, it will probably decline 14%, 15%. What are the things you can do to at least minimize that churn or at least stabilize that part of the business?

Mark Notarainni, Other

Our DIY business is a great business for us, and there's a little bit of distinction on the 14-15%, a lot of our customers in DIY have these life events and require the assistance or are searching the services that we have within our live product. And so many of them trade up into our live product. So that's a big area for us to be able to serve those customers and not have them defect um on the um on the on under 50k those value seekers it's um that that customer base churns a lot in the industry um and the way that we'll be able to uh solve that is one we have to make sure that we're delivering a model that delivers value to them beyond taxes because they shop for the lowest price on tax only. We believe we're uniquely positioned because of the consumer platform that we have to be able to be aggressive with our tax business, but monetize through value-added services. Some of those value-added services may be a fast money product, right, where you can get access to your refund fast that's very important that customer base we also know that the customers that we have that are in turbo tax and in credit karma consume services at a higher rate across the platform and we're uniquely positioned with credit karma with a suite of financial products from loans to credit cards to insurance, where we can actually add value to that customer every year. We can save them money every day during the year, which will then create loyalty in the tax product when it comes to tax time. They're 80% done with their taxes and they won't go anywhere else and they'll stay within the franchise. So at the heart of our diy business is really getting and connecting price and value and creating the flywheel within our platform so that we can actually engage with those customers uh every year uh every day uh during the year and those critical financial decisions that they make throughout the year okay so there is a price value mismatch that you're trying to at the low end yeah at the low end and And in terms of, I think, this is a question we're getting, like, have you started seeing that towards the end of the taxes in, beginning throughout that?

Operator

Or basically the question is, is that the issue you saw on the top of the funnel, or is the conversion retention, like, where exactly the weakness you saw when you saw the data?

Mark Notarainni, Other

For the low-end, yeah. You know, it's at the top of the funnel when they're shopping. We see some in our shopping experience, and that's where we have to connect the value and the price better together. Generally, when they get into the product and they're in the right product, they will finish and file with us.

Operator

The other question we're getting is, where do you believe those customers at the low end who leave TurboTax, where are they going? Is that a lower price paid provider, free filing options, or do you see, you know, yeah.

Mark Notarainni, Other

You know, 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. You 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 you know savings accounts or pay off debt like we can 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 uh and then uh really connect our ecosystem and our platform together so that we're constantly uh providing value beyond tax for those customers

Operator

that are looking for um value beyond tax so so just to clarify that value beyond tax now that credit karma and turbo tax under you that's where the potential is where you can bring value to those customers with credit karma absolutely and that's where you know we saw a really great momentum this year.

Mark Notarainni, Other

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. We see the power of the consumer platform actually starting to come together.

Operator

Other topic on AI displacement concern, like Sasan always been saying that, you know, Tintuit is an AI beneficiary, not a victim of that. And this, did you see any kind of filers switching to any DIY kind of solutions or did they use ChatGBT file somewhere else? Any kind of data you think you've seen?

Mark Notarainni, Other

You know, I think we see the traditional players, that's right now where they're going. We do see some of the new AI startups, 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 ChatGPTA. We see them interacting with Claude, asking their questions, either when they're in session with us. um or they start there um and we've deep we've embedded uh our experiences uh into both claude and um and into uh chat gpt um and we're excited about what we learned there so uh we will continue to do that um the other piece um 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 right 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 a 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. 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 decisions.

Operator

I want to drill a little bit deep into this integration with OpenAI. it was, I think, middle of the taxes and you announced that. Help us understand 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 ChartGPT as another funnel to get more, or is the experience that at the ChartGPT you can get your tax done, and when ChartGPT is doing that, it can leverage you know you're into it llm or slm you can say how what's your strategy how you're thinking about that evolving the strategy um so it's definitely going to be a funnel right geo is is is is here to stay customers are going to start there and ask questions and so we want to make sure um that our content is showing up that we're referenced um and that they can easily connect into our products.

Mark Notarainni, Other

We did deeply embed certain components of our product into OpenAI and Cloud this year, and we learned a lot. It did not provide a lot of outcomes for us, right? It's 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 But then we're very pleased with all of our partners across Gemini and our relationship with Gemini, ChatGPT, and Claude as well. We are very much embedded in working through different iterations for both personal finance and for tax.

Operator

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 bit 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? Well, you also use AI too. So what do you think in our next two, three years?

Mark Notarainni, Other

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 would be the monetization strategy well because they have to pay for tokens yeah 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 and consumption of our 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 in our uh call rates into our call centers and it drove conversion impact yeah 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 yeah and so that's how we're thinking about it when you look across uh our assisted category yeah um we believe it's a it's an incredibly uh 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.

Operator

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, I have seen TurboTax change a lot, you know, questions, rule-based.

Mark Notarainni, Other

Now are you leveraging AI so use your next future TurboTax product will be as good as some of the you know competitors maybe on top of LLM yeah it's you know TurboTax historically has been built on a 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 percent 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 were 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 by the end of tax season or by april 15th it was it was an ai first experience our digital assistant was there as a sidecar yeah we loved what we 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 that's a big that's a big change because the interview launched

Operator

our business yeah and TurboTax the reason I asked that question is if you offer AI based solution 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. One part is, you talked about last year, early... Refunds. Early refunds, that one. First of all, how was that this year versus last year?

Mark Notarainni, Other

Yeah, we delivered $25 billion of early refunds to customers this year, so it was very successful for our customers.

Operator

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

Mark Notarainni, Other

Yeah, 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 uh uh fast access to money through their paycheck advance uh 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 um during tax time and it won't be um it will be more natural for them to stay within our product we see that where our customers that our credit customers um they've consumed one or more products within credit karma their loyalty within the tax product is higher and so building that um 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 yeah that sounds like the strategy of your

Operator

competitors who probably took away some of your low-end customer you know that's That's how they're monetizing offering free tax.

Mark Notarainni, Other

Yeah, we see that emerging more.

Operator

That's just still early, but we definitely see that as an emerging competitive play as 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 margin or efficiency?

Mark Notarainni, Other

Yeah, I think it's all the above. It definitely will help us scale our business, no question about that. It's gonna 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 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.

Operator

Probably last question under your leadership. Credit Karma, I think 19% growth against such a tough comp. Phenomenal job. That's doing well. And with TurboTax side, you have challenges as well. Like next one year until the tax season starts, what's your focus going to be?

Mark Notarainni, Other

Yeah, I think it's going to be in three 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 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 money them 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.

Operator

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 IRS. Hopefully you'll continue to do that and the customer will keep paying you. Thank you so much for joining us.

Mark Notarainni, Other

Thanks, I appreciate it.