But we have to do it in conjunction with continuing to increase network connections. And we’re really excited about in the long term what’s possible, digitizing all of B2B, because it’s very – it’s incredibly beneficial to our customers because they get paid faster, and two, it’s really a sticky product.
James Friedman: Thank you so much.
Sasan Goodarzi: You’re very welcome.
Operator: The next question comes from Raimo Lenschow with Barclays.
Raimo Lenschow: Thank you. Congrats for me as well. Question for Sandeep. As we think about this year, you kind of said you didn’t expect a lot of kind of recovery to help. It’s just like how you manage the business. But if you think about cost, so far you’ve been doing really well on margins. But there’s also obviously an element of getting ready for things are getting better. How do you see the progression of investments this year? Thank you.
Sandeep Aujla: Hey Raimo. Thanks for that question. Super important one, and let me share some of my thoughts. First and foremost, I’ll start with the fact that we’re deliberately building this business to scale growth while increasing our profitability. In fact, those are principle ones and two of our financial principles that we use to manage this company. So that’s a very deliberate approach that we are taking. And we have a track record of expanding margin over the years while bringing innovation to markets such as Intuit Assist, such as building innovation to address the opportunity we have in the mid-market such as innovation to localize products in Mailchimp for the international market. So we are not leaving growth opportunities on the table with our focus to scale growth and drive innovation.
Now, the second component of your question, in terms of the profitability profile so far this year, we look at our margins and aim to deliver our margin commitments for the full year. And I feel quite confident in our path to do so. And the performance we had in the first couple of quarters, in fact, bolster the confidence that I have in our full year guidance.
Raimo Lenschow: Perfect. Thank you.
Operator: The next question comes from Mark Murphy with JPMorgan.
Mark Murphy: Thank you very much. So, Sasan, within the QuickBooks business you have this growth vector in the up market [ph], and I’m curious if you’re able to comment on the growth and traction that you’re seeing in that 10 to 100 employee segment versus the one to nine or zero to nine employee segment. For instance is one of those growing mid-20s and the other is high teens just interested in how much of a spread you see there and maybe where you see it trending this year?
Sasan Goodarzi: Yes. Sure. I’ll add a perspective and would invite Sandeep to chime-in as well. I think the short answer is we are seeing more traction in our higher value customers and our mid-market customers, which I think to your frame is 10, 15 employees and up or more higher revenue customers. We are seeing more traction there, more momentum there. And by the way a big part of it is that’s where we’re really focusing our innovation, our go-to-market. At the same time to be clear we – we always remain paranoid and always believe in the notion of disrupting from the low end, which is by the way why we just launched a Solopreneur offering, which is to be able to serve those small businesses that in essence they’re on their own.
Because we believe that it’s helping entrepreneurs when they’re a team of one, because one-day some will become a team of thousands. So we’re not taking our eye off the ball on the low-end at all, but we’re doubling down on our focus on the higher value customers. And yes, we do see more resiliency, more momentum with these larger customers.
Sandeep Aujla: And to covered the topic, the only thing I would add is that the unit economics on the upmarket is also something that we find quite attractive. These customers, they tend to scale to much higher ARPC especially as we get them to adopt our platform. They by definition have more employees. They by definition of processing more payments, so that’s also something that we find attractive and is very much an area that we are having our go-to-market teams and our product teams deliberately lean in this year.
Mark Murphy: Thank you very much.
Sandeep Aujla: Very welcome.
Operator: The next question comes from Steve Enders with Citi.
Steve Enders: Okay. Great. Thanks for taking the questions here. I guess maybe just on the SMB side again; I think you made a comment in the prepared remarks about shifting towards ARPC over time as a growth lever. I guess one want to clarify that comment and then secondarily, does that change how you think about the levers of growth moving forward for the SMB segment, more towards ARPC, away from the customer side?
Sasan Goodarzi: Thanks for the question, Steve. The way we think about it, and as we were just addressing in the prior question, we see tremendous opportunity in the mid-market for those that we currently define as having ten to 100 employees. And what really excites us about this opportunity is that these customers come with a much higher lifetime value, much higher ARPC, and have better retention. And so that just helps out our economics, but these customers also tend to have higher customer acquisition costs and there are relatively fewer of those than the smaller customers by definition, when you look at the overall addressable market. So as we focus on these larger customers, that means we will get higher ARPC per customer, even though there are fewer of those.
So that is where the growth formula, we continue to abide by the growth formula that we have publicly discussed about 10% to 20% customer growth, 10% to 20% ARPC growth. But as we continue to focus on the mid market, you should expect us to lean in more towards the ARPC growth because of this dynamic with the mid-market, and that we think that’s actually a good thing for the business going forward.
Steve Enders: Okay. Perfect. Thanks.
Operator: The next question comes from Scott Schneeberger with Oppenheimer.
Scott Schneeberger: Thanks very much. Good afternoon. Sasan, a couple of task questions. One, we’re three weeks in. We’re pretty well through the early season. You had anticipated earlier, before the tax season that we would see a probably flattish year for the industry. And that felt kind of conservative. Now that we’re in a bit and we’ve also seen a return to DIY category shift, I’m curious if you have any update on what you’re seeing for the industry overall thus far. And then the second part is on full service. You sound very happy with it, the 88 number recommendation score. Could you speak to some of the growing pain points you had last year and the fixes you’re seeing this year as you’re working your way through the early season? Thanks.
Sasan Goodarzi: Yes. Sure. Thank you for the question. Our view, having been through however many tax seasons we’ve been through as a company, is it’s early in the season to estimate how many folks will ultimately file when it’s all said and done. With that said, our belief is still the same. It will probably be total of number of filers will probably flattish, maybe up a little bit. Our perspective really hasn’t changed because our focus is how do we win as many filers within the category that are going to file. So the first answer is our view hasn’t really changed. The second, on full service and some of the growing pains, I would call out a few from last year compared to what we’re doing this year. One is, we actually made it difficult for customers to get into full service last year.
And by the way, it was more trying to ensure the customers were really, really getting into the right service. But we had so much friction that we had created up front. And if you think about somebody that just walks into somebody’s home or office and sort of hands everything over and says, here, get my taxes done. And then they interact until three or four weeks later until their taxes are done, the notion of engaging and putting a lot of friction up and asking a lot of questions up front is not a behavior they’re used to. So that was a big learning and growing pain, a lot of which we have removed all the friction and engage – get a customer to engage an expert, depending on what we know about them, very, very early. So that’s one.
I think the second one, we learned a lot about what did and did not work in our campaigns last year. And there’s a lot we are doing differently to really help customers, both on air, digitally, but also the infrastructure that we are working on, which, by the way, is not going to be done this season. Right. We’re going to be investing in it for several years. Were basic things which, by the way, are very powerful, where if I did your taxes and you love the work that I did for you, and by the way, our product recommendation score of 88 would suggest that our experts are delivering excellent service. You’d want to recommend me to your friend? Well, last year you could not do that. And this year we’re building the capabilities that you could actually recommend me to a friend.
And that virality is a very big thing, especially when you have an 88 product recommendation score. And then lastly is 43% of those that use an assisted method, that choose to switch to somebody else. 43% will actually go on Google and Google is there a tax pro near me? And again, that’s another example of where we didn’t have the infrastructure to show up and we’re building that infrastructure. So I can tell you for a fact, in San Jose, California, right or in Los Gatos, I should say if you put in tax pro near me, we will show up top of the list. We being TurboTax. If you do it in Atlanta, which is where I was a few weeks ago, we don’t show up because we’re working on. So that’s an example of the things that we learned last year that we’re implementing this year, but not just for this tax season, but really to nail it with excellence as we think about the future.
Scott Schneeberger: Great. Thanks.
Sasan Goodarzi: Very welcome.
Operator: The next question comes from Keith Weiss with Morgan Stanley.
Keith Weiss: Excellent. Thank you guys for taking the question. This one’s for Sandeep as well. Another margin question, but a little bit of a different angle. When it comes to generative AI, we’re really been talking a lot about the potential top line impacts. Are there operating margin benefits that you guys can see through? Just better usage of the GenAI technology internally, whether it’s stuff like code assist or whatnot. And then on the flip side of the equation, given that a lot of this stuff is still ramping up. Is there anything we should be looking out for on the gross margin line in terms of just like these capabilities being that much more compute intensive and that much more impactful on COGS versus what you’re seeing in consent assessment today? Thank you.
