{ "docId": "019dd923-622c-750b-8b99-91010c0bd592", "docSlug": "937587dba6b9", "documentTitle": "Intuit Inc. (INTU)", "authorId": "54_Spruce_Point_Capital", "authorName": "Ben Axler", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2024-09-20 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 27, "pageCount": 125, "prevPage": 26, "nextPage": 28, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "dense", "nDataPoints": 0, "notes": "The slide uses bold red text to emphasize the specific new language added to the 10-K filing.", "elementsJson": [ "headline_text", "paragraph", "callout_box" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b99-91010c0bd592/27", "deckHref": "/decks/019dd923-622c-750b-8b99-91010c0bd592", "deckJsonHref": "/decks/019dd923-622c-750b-8b99-91010c0bd592.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b99-91010c0bd592#slide-27", "components": [ { "bbox": null, "kind": "callout", "text": "Given the deteriorating small business credit environment, we believe these disclosures may be a harbinger of potential adverse future disclosures regarding loan losses.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-1ac4-74a6-be36-6b9e4eff2866", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.52, "w": 0.96, "x": 0.02, "y": 0.42 }, "kind": "paragraph", "text": "We maintain an allowance for credit losses on loans held for investment to reserve for lifetime expected credit losses in the loan portfolio. The allowance for credit losses is determined based on our current estimate of lifetime expected credit losses, historical credit losses, estimates of recoveries, and future expectations as of each balance sheet date. We evaluate the creditworthiness of our term loan portfolio on a pooled basis due to its composition of loans with similar general credit risk and characteristics. Expected credit losses are measured based on a loss forecasting model and calculated by applying loss curves derived from loan level risk segment and term mixes, aggregated at monthly loan vintages. Expected credit losses are continually updated with actualized charge-offs in each month as they occur. The allowance is inherently subjective and requires management estimates. The methodologies are updated periodically to reflect factors such as actual loan performance, changes to assumptions, portfolio growth, credit policies, changes to our applicant base, and macroeconomic conditions. Factors taken into consideration in the methodology include historical performance, customer creditworthiness, changes in the size and composition of the loan portfolio, and actual credit loss experience. We use empirical data and management judgment to estimate losses for new credit tests or products for which we do not have enough history. We make judgments about the known and inherent risks in the loan portfolio, adverse situations that may affect borrowers’ ability to repay, and current and future economic conditions. When available information confirms that the specific loans or portions thereof are uncollectible, identified amounts are charged off. Loans are charged off in accordance with our charge-off policy, as the contractual principal becomes 120 days past due or meets other charge-off policy requirements. Subsequent recoveries of the unpaid principal balance, if any, are subtracted from charge-offs to compute a net charge-off and are recorded to cost of service revenue in our consolidated statements of operations. As of July 31, 2024 and July 31, 2023, the allowances for credit losses, amount of charge-offs recorded, and amount of recoveries on term loans to small businesses were not material.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b617602d-96dc-48b7-b881-7590b0719af0", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.17, "w": 0.96, "x": 0.02, "y": 0.17 }, "kind": "paragraph", "text": "Intuit's disclosures regarding its lending activities have changed over time, yet as discussed previously the Company still excludes metrics related to the health of its loan book that are typical of companies that engage in such operations. While Intuit states that allowances for credit losses and charge-offs are not material, it says the same about its interest income earned from its lending activities. However, we highlight that in its recent FY 2024 10-K, Intuit included substantially more discussion of its credit processes and practices. Given the deteriorating small business credit environment, we believe these disclosures may be a harbinger of potential adverse future disclosures regarding loan losses.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f9d16dce-1984-4a1a-912d-1562bdb305a9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.25, "x": 0.02, "y": 0.96 }, "kind": "source-note", "text": "Source: Intuit FY 2024 10-K, Spruce Point Research", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3f4da1eb-437a-432d-83a2-9803de0d2ced", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.67, "x": 0.31, "y": 0.03 }, "kind": "title", "text": "We Find It Ominous That Intuit Dramatically Expanded Its Credit Practice Disclosures In Its Recent 10-K", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "20fa2b2e-5058-4887-9452-7672e2fe0a4d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.04, "w": 0.96, "x": 0.02, "y": 0.35 }, "kind": "title", "text": "Review of New Credit Practice Language in Intuit’s FY 2024 10-K (Substantially New Language in Bold/Red)", "attrs": null, "subkind": "subtitle", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c8ffd6a4-8f25-4c1d-855b-487511505075", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "50034c04-c3eb-4dab-9f86-f322ae960f25", "evidence": "The slide frames new disclosure language as a 'harbinger' of hidden risks, a classic activist technique to expose potential accounting or operational obfuscation.", "confidence": 0.85 } ], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }