1 00:00:00.000 --> 00:00:02.700 Johny Fernandez: So Sean, there has been some news regarding 2 00:00:02.730 --> 00:00:06.300 Intuit. I know their financials just came out. Yeah. For the 3 00:00:06.300 --> 00:00:09.540 first quarter, and they had some interesting numbers. So let's 4 00:00:09.540 --> 00:00:10.530 talk a little bit about that. 5 00:00:10.560 --> 00:00:12.960 Sean Murray: Sure. So Intuit, the reason that they are 6 00:00:12.960 --> 00:00:16.020 newsworthy is that they are, believe it or not in the small 7 00:00:16.020 --> 00:00:17.580 business lending industry. 8 00:00:17.730 --> 00:00:20.640 Johny Fernandez: Yeah. Well, I did read, you know, that they 9 00:00:20.640 --> 00:00:24.210 actually they've been working with. I mean, they're known for 10 00:00:24.240 --> 00:00:24.840 QuickBooks. 11 00:00:24.870 --> 00:00:25.800 Sean Murray: Yes, that's right. 12 00:00:26.040 --> 00:00:27.720 Johny Fernandez: But they've also kind of jumped into the 13 00:00:27.720 --> 00:00:28.200 space. 14 00:00:28.200 --> 00:00:31.930 Sean Murray: Yeah. Yeah, that's true. So, so Intuit, they do a 15 00:00:31.930 --> 00:00:35.440 lot of different things. They own Credit Karma. Now, the 16 00:00:35.440 --> 00:00:38.890 acquisition ended late last year. And they also own 17 00:00:38.890 --> 00:00:41.650 QuickBooks. And they have a brand through that called 18 00:00:41.650 --> 00:00:44.470 QuickBooks Capital, which they originate. From what I 19 00:00:44.470 --> 00:00:48.850 understand are term business loans. And one of the, the great 20 00:00:48.850 --> 00:00:51.700 part, great parts about them being a publicly traded company 21 00:00:51.700 --> 00:00:55.630 is that their financials and you know their statistics are 22 00:00:55.660 --> 00:00:58.960 publicly available. And everyone's very interested to 23 00:00:59.260 --> 00:01:02.380 check and find out how everyone is stacking up against everybody 24 00:01:02.380 --> 00:01:06.550 else. So these are things that I love to go and look at. And so 25 00:01:06.550 --> 00:01:11.800 we went into Intuit's recent quarterly financials. Yep. And 26 00:01:11.830 --> 00:01:15.010 one thing that's important to note about Intuit is that they 27 00:01:15.010 --> 00:01:20.110 file their information on a fiscal year basis. So they just 28 00:01:20.110 --> 00:01:24.460 finished their 2021 fiscal year. So for most people, the end of 29 00:01:24.460 --> 00:01:29.140 the year is December 31. But Intuit finished, there's I think 30 00:01:29.140 --> 00:01:31.300 it was July 31. I think. 31 00:01:31.300 --> 00:01:34.120 Johny Fernandez: Yeah, it was July 31st. And if we want to go 32 00:01:34.120 --> 00:01:36.370 through some of the numbers, I mean, it sounds like. Sure. They 33 00:01:36.370 --> 00:01:40.720 originated, $232 million dollars. 34 00:01:41.710 --> 00:01:45.010 Sean Murray: Yeah. 200, 232 million? That's correct. Yeah. 35 00:01:45.040 --> 00:01:51.040 $232 million dollars in that was for the entire 12, a 12 month 36 00:01:51.040 --> 00:01:53.470 period. So that wasn't a quarterly figure that was an 37 00:01:53.470 --> 00:01:56.950 entire 12 month period $232 million. We can presume that was 38 00:01:56.950 --> 00:01:59.110 through their arm QuickBooks capital, even though it didn't 39 00:01:59.110 --> 00:02:02.290 specifically say this without Intuit's books. And the 40 00:02:02.440 --> 00:02:05.290 significance of that number is that that would technically put 41 00:02:05.290 --> 00:02:09.160 them among the largest players in the small business finance 42 00:02:09.370 --> 00:02:13.330 industry. They're definitely not the largest, but they're not 43 00:02:13.330 --> 00:02:17.110 nobody. Yeah. And I think what's powerful about Intuit and 44 00:02:17.110 --> 00:02:20.080 QuickBooks is that a lot of the small business owners use 45 00:02:20.080 --> 00:02:24.730 QuickBooks as their go to software to handle their, their 46 00:02:24.730 --> 00:02:27.700 accounting and bookkeeping. Right. And a lot of folks use 47 00:02:27.700 --> 00:02:32.020 Credit Karma to, you know, assess their credit. And so it's 48 00:02:32.020 --> 00:02:35.860 a very, these are very powerful tools that they have as a 49 00:02:35.860 --> 00:02:38.740 lending company, in order to, you know, to build up their 50 00:02:38.740 --> 00:02:42.340 lending business. I will say, though, that, from what I could 51 00:02:42.340 --> 00:02:47.170 tell Intuit's small business lending volume is down. Yeah. 52 00:02:47.170 --> 00:02:51.250 From the previous year and down even more from 2019. 53 00:02:51.570 --> 00:02:53.160 Johny Fernandez: Yeah, and want to compare numbers. I know, in 54 00:02:53.190 --> 00:02:57.540 2020, they made about 243 million for that fiscal year, 55 00:02:57.570 --> 00:03:02.550 and we compared to 2019. It did three 316, millions of million 56 00:03:02.550 --> 00:03:07.680 from 2019. So they they're definitely down, you know, a 57 00:03:08.160 --> 00:03:10.620 decent amount from the last two years. 58 00:03:10.620 --> 00:03:13.310 Sean Murray: Yeah. You know, I will tell you this, and I didn't 59 00:03:13.365 --> 00:03:16.630 speak to anyone at the company. So I'm just drawing straight 60 00:03:16.685 --> 00:03:19.623 from their financials, I could tell that they were not 61 00:03:19.678 --> 00:03:23.052 highlighting the small business lending unit of their company. 62 00:03:23.106 --> 00:03:26.589 It was in there, because I think it has to be in there, you have 63 00:03:26.643 --> 00:03:30.072 to disclose, you know, what type of numbers they're putting up. 64 00:03:30.126 --> 00:03:33.391 But I could tell that they were not highlighting it. I don't 65 00:03:33.446 --> 00:03:36.439 think it came up during the earnings call at all. And I 66 00:03:36.493 --> 00:03:39.758 think that Intuit's long term goal isn't to be isn't to have 67 00:03:39.813 --> 00:03:43.024 lending be a driver of their company. I think it's probably 68 00:03:43.078 --> 00:03:46.506 more of a value add? Yeah. Well, it's for some other tech, like 69 00:03:46.561 --> 00:03:49.663 companies are using lending almost as a driver of growth, 70 00:03:49.717 --> 00:03:53.091 Intuit doesn't need to do that. I mean, QuickBooks is a pretty 71 00:03:53.146 --> 00:03:56.465 powerful product Credit Karma is great. And then Credit Karma 72 00:03:56.520 --> 00:03:59.948 generated significant revenue in Q2, if I'm not mistaken. Yeah. 73 00:04:00.003 --> 00:04:03.268 $405 million alone, just from Credit Karma. So I don't think 74 00:04:03.322 --> 00:04:06.696 that they need to be a lending company. But they're definitely 75 00:04:06.751 --> 00:04:09.852 a a company to keep an eye on. Because that's significant 76 00:04:09.907 --> 00:04:13.009 volume that should not be ignored. And they have an entry 77 00:04:13.063 --> 00:04:16.328 point with small businesses and merchants that others do not 78 00:04:16.383 --> 00:04:19.485 have. It's very easy to trust a button in your QuickBooks 79 00:04:19.539 --> 00:04:22.641 software, because you use QuickBooks for your accounting. 80 00:04:22.696 --> 00:04:23.730 That's a huge edge. 81 00:04:24.530 --> 00:04:27.710 Johny Fernandez: And let's definitely, kind of piggyback 82 00:04:27.710 --> 00:04:31.310 off that and jump into another big story that we have we know 83 00:04:31.310 --> 00:04:34.640 that prosper market also, we really sell we they released 84 00:04:34.640 --> 00:04:37.730 some of their financials. And let's talk a little bit about 85 00:04:37.730 --> 00:04:41.450 that. We know that they're not publicly traded, but they do 86 00:04:41.450 --> 00:04:44.060 have to file their quarterly reports. 87 00:04:44.060 --> 00:04:47.360 Sean Murray: That's true. I like companies that are not publicly 88 00:04:47.360 --> 00:04:51.440 traded that still have to file. Yeah. Because it not everyone is 89 00:04:51.440 --> 00:04:53.690 looking for that type of information. Yeah. For a 90 00:04:53.690 --> 00:04:55.820 publicly traded company. There are a number of analysts who are 91 00:04:55.820 --> 00:04:59.150 closely watching that stock, and they know everything about what 92 00:04:59.150 --> 00:05:01.100 the company did, and they are financials than in their 93 00:05:01.100 --> 00:05:03.980 performance before somebody like we can jump in and find out. 94 00:05:03.980 --> 00:05:08.090 Yeah. So I really liked that we have the opportunity to do that 95 00:05:08.090 --> 00:05:11.390 with Prosper because they are one of the long standing peer to 96 00:05:11.390 --> 00:05:15.500 peer lenders. In fact, you could argue that Prosper still is a 97 00:05:15.500 --> 00:05:18.380 peer to peer lender, even though I've often said that peer to 98 00:05:18.380 --> 00:05:21.170 peer lending is essentially dead. Yeah. It's been replaced 99 00:05:21.170 --> 00:05:24.950 by lending platforms that where all the money that essentially 100 00:05:24.950 --> 00:05:28.490 coming from banks. And the idea of peer to peer lending has just 101 00:05:28.490 --> 00:05:32.000 been phased, phased out Lending Club doesn't do it anymore. 102 00:05:32.030 --> 00:05:35.300 Yeah. They acquired Radius Bank, they don't need peers anymore. 103 00:05:35.300 --> 00:05:38.420 It's not part of their model. But Prosper still had a pure 104 00:05:38.420 --> 00:05:42.320 element to their business, even though it's not the main segment 105 00:05:42.380 --> 00:05:43.430 of their business. 106 00:05:43.500 --> 00:05:45.450 Johny Fernandez: Yeah, so let's talk about numbers. I know, 107 00:05:45.780 --> 00:05:50.370 their latest financials said that they made about 450 million 108 00:05:50.730 --> 00:05:53.160 worth of loans in the second quarter. 109 00:05:53.340 --> 00:05:55.786 Sean Murray: Yeah, you know, Prosper only does consumer 110 00:05:55.844 --> 00:05:59.280 loans, they don't do business loans. But I think Prosper is 111 00:05:59.339 --> 00:06:02.950 not talked about enough in terms of their impact on the online 112 00:06:03.008 --> 00:06:06.328 lending market, the consumer lending market. I think some 113 00:06:06.386 --> 00:06:09.997 people kind of counted them out a few years ago. Yeah. They've 114 00:06:10.056 --> 00:06:13.667 hung around. And I think if you look at the financials, you'll 115 00:06:13.725 --> 00:06:17.336 see that the company financially is operating relatively, on a 116 00:06:17.394 --> 00:06:20.889 relatively healthy basis. They did have a small net loss for 117 00:06:20.947 --> 00:06:24.442 the quarter. But it wasn't, it wasn't like an incredible net 118 00:06:24.500 --> 00:06:27.529 loss. And in fact, if you compare it to the previous 119 00:06:27.587 --> 00:06:31.024 quarter, they had a huge loss in Q1, but that that loss was 120 00:06:31.082 --> 00:06:34.285 completely attributed to something that's listed as the 121 00:06:34.344 --> 00:06:37.314 change in fair value of convertible preferred stock 122 00:06:37.372 --> 00:06:40.925 warrants, right? So this wasn't like, you know, marketing was 123 00:06:40.983 --> 00:06:44.187 too high, or all the loans went bad, it was more like a 124 00:06:44.245 --> 00:06:47.798 technical evaluation change, of something that caused a write 125 00:06:47.856 --> 00:06:51.526 down in that particular quarter that erased all the profit that 126 00:06:51.584 --> 00:06:54.962 they had for the quarter. I think if you look at Q1 and Q2 127 00:06:55.020 --> 00:06:58.340 combined, and you understand what happened in Q1, you see 128 00:06:58.398 --> 00:07:01.660 that prosper overall, is actually doing pretty good. And 129 00:07:01.718 --> 00:07:05.446 I think that they are probably a company that people should keep 130 00:07:05.504 --> 00:07:09.174 an eye on. Yeah. In the online lending space. I don't know that 131 00:07:09.232 --> 00:07:12.727 they're that they're going to be continuing to grow the peer 132 00:07:12.785 --> 00:07:16.338 element of their business. Yeah. You know, something tells me 133 00:07:16.396 --> 00:07:19.774 that they will eventually go down the same road as Lending 134 00:07:19.832 --> 00:07:23.269 Club, you know, trying to buy a bank, whatever. They're the 135 00:07:23.327 --> 00:07:26.297 loans that they make are actually made by Web Bank. 136 00:07:26.356 --> 00:07:29.501 They're not made by Prosper. Prosper facilitates them. 137 00:07:29.559 --> 00:07:33.287 They're the technology servicing component right and so Web Bank 138 00:07:33.345 --> 00:07:37.014 an actual bank is the one making the loans and I can just see a 139 00:07:37.073 --> 00:07:40.684 future my personal opinion that Prosper ends up going down the 140 00:07:40.742 --> 00:07:44.179 same road of Lending Club. They're a company to keep an eye 141 00:07:44.237 --> 00:07:46.800 on definitely don't count out Prosper. Yeah.