Earnings Before Interest, Taxes, Depreciation, Amortization, and Coronavirus

Uber tries the EBITDAC maneuver with its latest numbers, adding back expenses due to coronavirus; a case study of a firm that grew 15% during the last recession — what accounting firms today can learn from Grassi & Co.; the House passes a bill loosening the restrictions on PPP money for small businesses; despite working more hours, professionals say they prefer to continue working from home after the pandemic is over; Deloitte plans to lay off 5% of staff, and more.


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Blake Oliver: [00:02:11] Welcome to The Cloud Accounting Podcast. I'm Blake Oliver.
David Leary: [00:02:14] I'm David Leary.
Blake Oliver: [00:02:15] So, how are things in Tucson, David? Is it calm? Crazy? 
David Leary: [00:02:19] It's relatively calm. I'm not close to downtown. I know that there were some protests last night. I know you're staying with your parents at Phoenix, a little closer to downtown Phoenix.
Blake Oliver: [00:02:29] Yeah.
David Leary: [00:02:29] Which I saw there was ... I mean, are you hearing things? Are you seeing things? 
Blake Oliver: [00:02:34] I didn't even know anything was happening in Phoenix until I turned on YouTube. My parents are cord cutters, which is kind of amazing considering they're in their late 60s and 70s. They ditched cable, so I don't get the local news unless I'm on YouTube. So, I saw, oh, there's protests downtown near the police headquarters. That was, I guess, last night, or the night before last. Then, yesterday, I went to the mall, which is open here in Scottsdale. I was getting a Play-Doh set for my son, and I was kind of surprised at how many people were not even trying to social distance. There was a giant line of people waiting to get into the Louis Vuitton store. I'm just thinking to myself, wow, this is really unnecessary. You're not even really going out anyway; do you really need more Louis Vuitton stuff? I don't think I'll be going back there. Then, last night, I was watching the news, and that mall was getting looted. They had looted the Apple Store; they'd looted Urban Outfitters. I don't know who these looters were, but- 
David Leary: [00:03:38] You know who it is? It's that jackass from YouTube, that Logan Paul guy ... That guy is trying to videotape and pump up his YouTube channel, so he just shows up. He's worth like $17 million dollars. He's a white guy from Scottsdale; went, and looted the mall, and documented it. 
Blake Oliver: [00:03:56] So, that's the guy they were talking about on Twitter. Wow.
David Leary: [00:03:59] Yeah. 
Blake Oliver: [00:03:59] Obviously, there's a ton of racial issues here that are really important that need to be addressed, and that is legitimate - police brutality, all this stuff. But then, I feel like there is an element of this, where it's just people that wanna go out and loot. Because there was a protest at downtown in Phoenix, which, I think that was the legit protest. Then, there were just these people looting the mall in Scottsdale [crosstalk] 
David Leary: [00:04:24] Yeah, I think that's a good example of that, because the march to go from downtown Phoenix to that mall in Scottsdale in 100-degree heat at 10:00 p.m. at night, probably it's not the protest marching to the mall [crosstalk] 
Blake Oliver: [00:04:36] No, it wasn't protesters. I think it was people taking advantage of the situation. I mean, I don't know. I wasn't there, but that's what it feels like. Why would you be looting Urban Outfitters if you're trying to protest? 
David Leary: [00:04:48] Yeah. Things are messy. The country is in pain. I actually was walking the dog this morning, and I was like, how do we even do a show today, right? I was just thinking, at some level, it's important when we do a show, right? 
Blake Oliver: [00:05:00] Right. 
David Leary: [00:05:00] When the country's in chaos, we need to be watching ... I saw something on Twitter, just like COVID vanished; PPP has vanished ... When the country's in chaos, this is when the IRS, the SBA, government passes laws, and they pass bills, and they do things that nobody notices. At some other level, I step back and think about tax policy in this country dictates social policy. Accountants and bookkeepers, what's happening right now, we have says in; we influence; we're going to feel the effects of this, even at the level ... There'll probably be some bill in that's a protest/riot-damage bill, or something in small businesses, which'll have tax implications. This is going to affect all of us, and to not do the show doesn't make a lot of sense. 
Blake Oliver: [00:05:46] Well, and I think that the media is portraying this as about one thing, which is police brutality, and the specific instance with Floyd. I wonder how much of the protests, and the anger is not just that, but also the whole situation right now - being in lockdown for months; the economic impact of losing your job, which has overwhelmingly hit minority communities, and disadvantaged communities. That all ties together. It's not just one thing. It's this whole situation that's been brewing for months and months and years. 
David Leary: [00:06:27] Yeah, it's a tinderbox that's gone off ... I mean, maybe that isn't the best word, but it's just this pressure's been there. Then, on top of that, you lop in the fact that the pandemic, and COVID is affecting minorities more- 
Blake Oliver: [00:06:39] Yeah, right. 
David Leary: [00:06:39] It's just the perfect storm to where something was probably gonna happen anyways. You could just- you could start feeling it in the air, right? I don't know. It's [crosstalk] to digest. I've seen, even on some of the Facebook groups, even accountants are being a little snotty to each other. People are trying to have discussions about this, and people are definitely forging their lines in the sand of what side of this they fall on.
Blake Oliver: [00:07:06] Yeah, well, to me, the crazy thing was, since we're in the cloud, here, Twitter putting warnings on Trump's tweets and then, flat-out blocking one from view - you had to click through to see it - for glorifying violence. That is amazing that that happened. People have been criticizing the social media companies for years for not doing this. Now, Twitter does it. They take a stand. They do it. Then, Mark Zuckerberg says, "No, Facebook is not going to do that." It's like this showdown now with Trump, and the executive order. It's not actually going to do anything because he doesn't have the power to do it, but ... It's nuts, right now. Somebody was comparing this to the summer of 1968, or something [crosstalk] 
David Leary: [00:07:51] Yeah, the election year, leading up to the conventions. 
Blake Oliver: [00:07:56] Well, anyway, there was some good news related to COVID-19, the pandemic, in terms of the government response, which is that the House passed a bill to address some of the issues with the Paycheck Protection Program. This was as reported in The Wall Street Journal. It's a bipartisan bill that passed 417-to-1 on Thursday. The bill, which still has to get passed by the Senate, and signed by the President, would reduce the level of the funds that have to be used on payroll from 75 percent to 60 percent and would also give borrowers up to 24 weeks to use the funds up from the eight set in the initial bill passed in March and extends the deadline to rehire workers to December 31. 
David Leary: [00:08:44] I'm starting to firmly believe that the march towards just rubber stamping all PPP forgiveness is gonna happen. It'll be this bill, this week, and we'll probably see another bill, two weeks from now. It's the only thing that makes sense, right? What they're doing is they're wasting small businesses time, every time they change this. They're wasting accountants', and bookkeepers' time. Now, there's a whole different crisis on the table, where, are they gonna really pay any attention to PPP now? They're gonna have to just get this off their plate. The only way to do that is just, if you're under $2 million, we assume that the banks vetted you out; they're gonna rubber stamp it. I truly believe that's gonna happen. I don't have any proof, I just- I think it's just a march. We're just marching towards it, towards it, towards it. 
Blake Oliver: [00:09:26] Yeah. I think that's going to happen simply because of the lack of resources to process approval applications. There's just no way that the SBA is gonna do this, and they're not really requiring the banks to do it. They just don't have the manpower to audit even a tiny fraction. So, maybe that's all they'll do is do a tiny fraction, and the rest will just get automatically approved, or they'll approve them conditionally, and then reserve the right to go back and audit years later. Maybe they'll do it then because you're supposed to save the paperwork for six years. They could theoretically come back and disallow it, after the fact. I don't know.
[00:09:58] It's a good thing. I think they should go farther, though. You said this at the very beginning of all the stimulus. You brought up this idea by economists that the best thing to do is just to give people money and attach very few strings to it. I think that was one of the lessons that we learned last time, in the Great Recession. Even reducing the payroll requirement from 75 percent to 60 percent is not enough. It should just- there should be no payroll requirement.
[00:10:20] This should just be money to small businesses. It should be small business stimulus. Don't attach these requirements to it, and the small businesses will figure out how to spend it. Yeah, some of them might not spend it the best way, but the whole point is to get money out into the economy. If you attach strings to it, it's gonna cause problems, just like this. That's the reason why there's still something like $100 billion dollars of PPP money there that people aren't even taking advantage of because, obviously, it's too difficult to use it.
David Leary: [00:10:52] Well, it's not just that. There's an article in Bloomberg about businesses are returning the money.
Blake Oliver: [00:10:58] Yeah.
David Leary: [00:10:58] Right?
Blake Oliver: [00:10:59] Because they can't spend it, so they're not gonna get forgiveness for it, so they don't want the loan.
David Leary: [00:11:03] $20 billion and PPP loans have been canceled. Some of it could be people applied twice with two different channels, so they canceled the application. Some of it's that, but ultimately, a lot of it is just because people are getting the money, and they either can't spend it; they don't know if they're gonna be audited. They don't know if they're gonna have ... They're already in debt. They struggled to get through April because of the economy, and now, they're struggling to reopen. They're not in a great situation to reopen, and then, the stress of this loan, so they're like, "What's in my control? Well, I don't have to take this loan," and they're just being done with it.
Blake Oliver: [00:11:35] Arguably, we don't know this for sure, but I'm gonna bet that almost all of that money, that $20 billion you said, is small businesses, private companies that really should be allowed to hold onto the money that need the money but are returning it because they can't meet these strings that are attached to it. Of the public companies that received PPP loans, 80 percent of them are holding onto the money. They're gonna keep it. That's according to an analysis by market research firm, FactSquared. Only 68 public companies have returned their PPP loans for a total of $435 million dollars. So, the public companies are able to take advantage of it because they can figure out how to jump through the hoops.
David Leary: [00:12:16] Except for now, the SEC is going to start investigating. Did you see this?
Blake Oliver: [00:12:19] No, I did not see that.
David Leary: [00:12:21] They are gonna start investigating public companies that got the funds. They've already started to send out some letters about this. Really, if you read the article, the whole premise is ... Well, actually, one part of the article, they do talk about the Co-Director of Enforcement at-
Blake Oliver: [00:12:36] Where was this? 
David Leary: [00:12:36] Bloomberg. This was in Bloomberg, this week. The Co-Director of Enforcement, at some group meeting earlier this month, he said- Steven Peikin ... Steven Peikin said that his division's already begun to focus time and resources on coronavirus-related misconduct.
Blake Oliver: [00:12:56] Ooh, wonderful!
David Leary: [00:12:56] The premise is that companies, if they took out this loan- because you're taking out the loan, because why, Blake? You have an economic ...?
Blake Oliver: [00:13:06] Need. 
David Leary: [00:13:06] Need, right? So, if they applied for this loan, and got a loan, but did not disclose in the previous quarters any going concerns, they may have defrauded investors, et cetera. 
Blake Oliver: [00:13:19] That doesn't make sense. That doesn't make sense, because to be a going concern, there has to be a question as to whether or not you'll be able to survive for the next 12 months, but the certification requirement in the PPP is way vaguer than that.
David Leary: [00:13:34] Yeah. Then, on top of that, I mean, how could you have disclosed in a previous quarter not knowing this pandemic was coming either?
Blake Oliver: [00:13:41] Yeah, exactly. That's ridiculous. What a waste- what a waste of resources. Oh, you wanna know another government screw-up in regard to this whole stimulus PPP thing? It's one of your favorite people, David, Betsy DeVos.
David Leary: [00:13:54] This is the education- 
Blake Oliver: [00:13:54] The education secretary, who is very controversial [crosstalk] 
David Leary: [00:13:58] - so you're gonna tie the PPP loan and government all the way back to the education secretary?
Blake Oliver: [00:14:03] Well, so part of the CARES Act law, I think this was in the CARES Act; might have been in the one before it ... The legislation suspended wage garnishments, and other involuntary collections on federal student loans until September 30, but the Education Department, or Department of Education has been garnishing people's stimulus payments to pay their federal student loans, despite that. Now, there's a class action lawsuit against Betsy DeVos for illegally seizing millions of dollars in tax refunds.
[00:14:36] One of the plaintiffs, Kori Cole, a graduate of Heritage College in Lakeside, Colorado, said she received a Treasury notice in April, saying her and her husband's entire $7,000 federal tax refund was seized. Oh, so this was not the stimulus payments, this is tax refunds, but the legislation related to those stimulus payments also suspended wage garnishments, and other involuntary collections on federal student loans.
David Leary: [00:15:00] They've been having problems with the federal student loans, and the Education Department. They had breaks for teachers put in that- 
Blake Oliver: [00:15:06] Oh, yeah. 
David Leary: [00:15:06] -and I think this goes back to '08-'09; breaks for teachers ... Then, they basically pulled back on it and just said, "Sorry, you gotta pay your loans now," even though these people went and got a degree to become a teacher. They've had messes, and it's been going on for a while with that. It's ... I don't know. What else? There's a- 
Blake Oliver: [00:15:27] I wanted to point people to a really great resource that I've been using over the last few weeks. My old firm, Armanino, they do a ton of business intelligence. They have a whole consulting arm around business intelligence and setting up people on Power BI and all that stuff. One of the cool marketing/helpful things that they have done is create a COVID Recovery Tracker. You can access this- the link will be in the show notes.
[00:15:57] It is this really cool dashboard where you can see, state by state, the three-day moving average, seven-day moving average, and 14-day moving average of cases in each state. You can drill down to the county level, which is really hard- it's hard to find data that's consolidated at a county level. If I, for instance, can go to Arizona, and then I can view counties, and I can click specifically down into Maricopa County, where I am right now, I can see that the seven-day versus 14-day moving average is up 1.4 percent as of today- 
David Leary: [00:16:31] This is for, actually, COVID cases [crosstalk] 
Blake Oliver: [00:16:31] COVID cases confirmed cases. Yeah. Of course, cases are not necessarily the perfect measure of what's going on because cases might go up because they're just testing more. It's hard to know. That's at least the argument of Maricopa County, right now. It would be great if they also had hospitalizations, but just even this - at a county level - is really interesting to see.
David Leary: [00:16:53] I don't wanna turn this to talking about COVID, the way it's spread, et cetera, but I think data, and as you drill down to those county levels, I heard a stat this week about how, in the Midwest, if a county has a meat-packing facility, their numbers are 5X higher than a county that doesn't. 
Blake Oliver: [00:17:10] Because people are crammed together in a production line.
David Leary: [00:17:12] It's cold, dry air; close together; and it's repeated ... But the thing interesting is now, we're seeing deeper data per county, and deeper data per, like, oh, all the people that were on this city bus, the people that sat by windows that were open, they didn't get it. So, data is really coming out very accurate about COVID, now, which means we're getting understandings, right? Who knows what it's gonna change and move forward, but we're getting much better data and much better understanding of it going forward.
Blake Oliver: [00:17:41] You were gonna talk about some PPP fraud?
David Leary: [00:17:42] Yeah, so there's more PPP insanity. There's fraud. Last week, we talked about the guy who set up some fake businesses. So, now, we have a Washington man. He he's a 35 year old Washington-state resident, Baoke Zhang; he's a software engineer. He tried to do this crime multiple times, so, obviously, he got caught. One of those instances, he asked for a sum of $1.5 million for a PPP loan. He created a fictitious technology company and fictitious employees. Here's the genius part or not-genius part - he applied, and got a real EIN number, a week before, then used that- he attempted to use that EIN number to get the loan.
Blake Oliver: [00:18:24] That's kind of a giveaway there.
David Leary: [00:18:27] That tells me you probably didn't have any employees prior to getting this ... They're catching the people that are really doing blatant frauds.
Blake Oliver: [00:18:35] Right.
David Leary: [00:18:35] There's always going to be some they won't catch, but it feels like the frauds are getting caught. But there's also just brain farts going on. Did you see Bank of America notified their customers of a potential data breach because of PPP applications?
Blake Oliver: [00:18:48] I saw something about that. Yeah, what happened there? 
David Leary: [00:18:51] Essentially, Bank of America and some other lenders - it doesn't say who they were - they had access to ... This is in quotes, "Limited-access controlled Small Business Administration test application platform." So, there's some platform they were testing, and you could upload some applications to. Apparently, they were uploading real applications to this, even though it was a test platform, and other lenders, for limited amount of time - other lenders that were in this test program - could see the applications that were being submitted by the other lenders. The fact that they weren't just making up fake loans to test this test environment is bizarro to me.
Blake Oliver: [00:19:30] That's just lazy.
David Leary: [00:19:32] Yeah. 
Blake Oliver: [00:19:32] At least it was only other lenders who could see this, right?
David Leary: [00:19:34] Yes. At least they say that. They're insisting that.
Blake Oliver: [00:19:39] So, my story isn't about fraud, but it's about creative accounting in public companies related to COVID-19. There's a new non-GAAP metric that is gaining popularity. David, are you familiar with the term "EBITDA?"
David Leary: [00:19:53] Please redefine for me. 
Blake Oliver: [00:19:55] Earnings before interest, taxes, depreciation, and amortization [crosstalk] 
David Leary: [00:20:00] This is what WeWork added like three extra letters to that, right? They created their own version of this? 
Blake Oliver: [00:20:05] EBITDA is classic non-GAAP measure because it shows- it backs out the interest, taxes, depreciation, and amortization from your bottom line. Investors wanna see, operationally, are you making money or not? It's kind of the well-accepted non-GAAP measure. Well, like you said, other companies, like WeWork, have adjusted EBITDA and have pulled out things like their marketing expenditures and stuff like that, which is just ... Most people would say that's not appropriate.
[00:20:37] Well, there's a new term. We're calling it EBITDAC. It's earnings before interest, taxes, depreciation, amortization, and coronavirus. I heard rumors about this starting to happen in Europe a couple of weeks ago, and now it has hit ... Reports of public companies in the United States, specifically Uber. Uber is now reporting a non-GAAP metric. They report adjusted EBITDA. In March, Uber made further adjustments to both of their adjusted EBITDA metrics to pull out $19 million, or add back $19 million of "payments for financial assistance to drivers personally impacted by COVID-19. So, it increased adjusted EBITDA by $24 million to remove those relief payments to drivers, along with the costs of personal protective equipment given to drivers. So, EBITDAC is a real thing.
David Leary: [00:21:32] You're gonna see more of this, because you said you saw this coming out of Europe.
Blake Oliver: [00:21:36] I guess it may be appropriate if coronavirus is a short-term thing that's only gonna last one quarter, but we all know that ... I think most of us realize that it's gonna take longer than that now, right? A survey of CFO was done by Deloitte called CFO Signals - this is an ongoing survey that they do - finds that CFOs don't expect that near-normal operating levels will resume until next year. Specifically- I can't even see. I gotta enlarge this. I can't see it.
[00:22:07] Yeah, so back in April, many more CFOs were expecting that near-normal operations would resume in 2020. Now, only six percent of CFOs think that normal operations will resume in Q3; 16 percent think that it will resume in Q4; 21 percent think that normal operations will resume in Q1 of 2021; and a full 39 percent feel that normal operations will not resume until the second quarter of 2021 or later. So, majority of CFOs think it'll be either Q1, or Q2, or even later than that.
David Leary: [00:22:46] So, your point of view on this then is they ... Because this is really just gonna be ongoing, it doesn't make sense to call it out separately anymore. It's just something that every single person is basically- every businesses affected by this [crosstalk] It's not special to an individual business.
Blake Oliver: [00:23:01] Yeah, so it's misleading to try and pull that out because they're probably gonna be spending that money for at least a year. So, anyway, one of the regulators in Europe was warning companies about using this metric. I think we'll see probably some of that happening here in the United States. Sandy Peters is the head of the CFA Institute in New York. And she said, "People will get creative telling their story, and our message is to be cautious of the creativity."

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David Leary: [00:24:44] What do you wanna talk about next? I have one small piece of app news that you'd be very excited about if you wanna jump over there.
Blake Oliver: [00:24:51] Well, I do have- I've got one more coronavirus story, and this is a positive story. It's a great case study, and maybe we'll offer our listeners some ideas for how to succeed. This is a story that appeared in Accounting Today. It's an op-ed by Gale Crosley, who is one of the Accounting Top 100 People and runs a firm, Crosley, and Company. The article is called, "Pathways to Growth: Press ‘Shift’ and prepare to pivot." 
[00:25:19] It's basically a case study of this firm, Grassi & Co, led by Lou Grassi, which opened in Long Island in the 1980s; started with just one person and is now a Top 70 firm. They experienced tremendous growth during the Great Recession. Gale details exactly what Lou Grassi did to grow his practice with an offensive strategy during the Great Recession.
[00:25:46] What he did was aggressively move to help clients with cash flow, accounts receivable, and figure out how to bring in bankers to get them involved in client turnarounds and then, convinced the bankers to stop worrying about audited financials for his clients, and focus on projections. The firm got really deep into providing clients with detailed financial forecasting, which then they would also get the bankers involved in. That helped the bankers get comfortable with providing financing. Clients got financing; were able to survive. They offered deferred payment to clients. We talked about this idea of deferred payment rather than doing the work for free, right?
David Leary: [00:26:26] Yep. 
Blake Oliver: [00:26:27] Because a third of firms are giving away coronavirus work for free right now, which I think is nuts. So, this is brilliant. The Grassi firm offered deferred payment to clients, but on one condition - they had to agree to contacting one or more friends, or associates and letting them know how Grassi was meeting their needs. This was a giant lead-generation funnel. They're getting their existing clients to bring in more clients in exchange for deferred payment. The firm grew 15 percent from 2008 to 2009, and that has been the normal amount of growth ever since.
David Leary: [00:27:02] That way, the work you're giving away for free is now genuinely a marketing expense because you're- in order to give that work away for free, you're basically doing a barter and saying, "Hey, you need to refer me one client."
Blake Oliver: [00:27:13] Yes, and they weren't even giving it away for free. They're just deferring payment until the economy improves, which could be a while, granted ... That was a huge marketing tool for them. I really liked the bit about financial forecasting. One other thing they did was they used these forecasts to internally rank risk for clients. So, they had a way to see all their clients and figure out which ones were in the most trouble and then triage those needing the most assistance.
[00:27:40] This is a great quote from the story. "Lou recalls talking with one distraught business owner who was not a Grassi client, but who was concerned about his company's future in 2008. When Lou asked what his current firm advised, the owner responded, 'I don't know. I haven't heard from them.' That told Lou everything he needed to know about the need to be present and solution-driven. The business switched to Grassi and remains a loyal client."
[00:28:03] That makes me think of that other stat that we talked about in a previous episode about how many firms have not even reached out to their clients to talk about COVID-19, or talk about the coronavirus situation. So, huge opportunity to talk to all these folks who are not getting helped and then convert them into your clients.
David Leary: [00:28:23] So, these examples are techniques this firm used during the 2008 crisis. I have an article from Jason Staats. It's Staats with two A's. He's @JStaatsCPA on Twitter. He caught my eye about two weeks ago because he was automatically creating a PPP forgiveness report by using Airtable. He automated some data, and movement. He caught my eye on Twitter; he was just talking about it. Anyways, he wound up writing a blog post called, "How we Pre-Billed 100% of our PPP Work and Still Sleep at Night."
[00:28:54] He really gives an outline, and a template on a way for firms to handle this billing for PPP - because we talked about it last week. You're not getting the agency fee. What do you do? - and really breaks it down into three things. You need to create a product. You have to take your service and make it become a product, a sales channel, and you need a way to drive clients to the sales channel. He has this nice little outline of like, you have to create a calculator, or this report could be the delivery. It could be a delivery phone call. You just have to take your service and turn it into a product.
[00:29:24] Then, he talks about a sales channel. Is it a sign-up link on your website? A single-page landing page? He gets into specifics of some tools he's used to build this out. Then, he even gets into very advanced tactics, with using Practice Ignition; combining it with Zapier, and some templates; doing mass emails. Then, drive them to your sales channel; do a webinar, a mass email.
[00:29:43] The nice thing is he gets into a little bit about the fears and answers questions - I feel bad for billing for anything; I'm afraid I'll overcommit myself; I don't have confidence in my technical skills to do a webinar; what will I do if they extend the PPP? What about agent fees? He really gives a little bit of a template on how to handle this and then, really, how to overcome those fears. That'll be in the show notes. It's worth checking out. It's a good article.
Blake Oliver: [00:30:08] Well, we talk about layoffs. One of the Big Four is now formally doing mass layoffs. Deloitte has announced that they are going to layoff five percent of their staff, firm-wide, and 1.5 of the workforce is either going to get furloughed, or have their work hours reduced with reduced pay. So, 6.5-percent layoffs plus furloughs. That's about 5,000 people at Deloitte that are going to lose their jobs, or have their hours cut back.
[00:30:38] That fits with the layoffs that I've seen, percentage-wise, in surveys of the profession. So, we're not hurting as much as some places where, what, national unemployment is - last time I checked - 15 percent. In California, it's like 25 percent. So, accounting is doing much better than everywhere else, but I would expect ... During the Great Recession, unemployment in accounting was- I think 10 percent of people lost their jobs, so I would not be surprised if we lost 10 percent of jobs, in the end, during this crisis.
David Leary: [00:31:12] I've talked to some firms that are from that firm size - 50 to 200 - and then, even smaller firms. I have not gotten any vibe that they've laid off anybody. It's really just the big gigantic firms. You said they laid off five percent of their staff, right? Deloitte just announced- 
Blake Oliver: [00:31:27] Right. 
David Leary: [00:31:30] I'm guessing they probably have 20 percent of bloat at Deloitte, so they probably can still get the same amount of work done with 95 percent of the staff they had before. But I'm not seeing a lot of smaller firms ... Actually, I'm seeing the opposite. I'm seeing that the smaller the firm is, I'm seeing people hire. I'm seeing accounting and bookkeeping firms post ads and hire during this time.
Blake Oliver: [00:31:50] Well, you know why? Because you're talking to cloud firms that are well-positioned to grow during the crisis.
David Leary: [00:31:57] Ohhhh ... Good point.
Blake Oliver: [00:31:57] Why? Because they have already figured out remote work. Here's something interesting that may actually relate to that Deloitte layoffs figure. You said that Deloitte can lay off people because they'll just make their current people work harder. Well, they may not even have to make them work harder because, apparently, people who work from home, professionals who have started working from home that used to work in the office, are working more hours. 54 percent of people at accounting firms say that they are working more hours since quarantine started. It's because they're working at home, and there's no division between being at the office and being at home now.
[00:32:36] This is a survey from Fishbowl that was reported in Going Concern. They surveyed 16,000 professionals across a variety of industries. I'm just talking about the accounting data. Over half, 54 percent, are working more hours since quarantine started because they're working at home. You wonder, though, are people okay with that? Would they prefer to go back to the office, or would they like to stay at home? Do you have a guess on this, David?
David Leary: [00:33:00] Is it divided between people who have kids at home versus people that don't have kids at home?
Blake Oliver: [00:33:05] It doesn't divide that way, but 59 percent said, yes, they would work from home permanently, if their firm allowed it. So, even though people are- half of people are working more hours, almost 60 percent would continue to work from home permanently, if their firm allowed it. The amount they're working extra is something like one to 10 hours per week extra, which makes actually a lot of sense because that's kind of the amount of time a lot of people are commuting every day. Instead of commuting, you're just logging on and starting work right way. So, it proves that whole idea, that remote work is more productive.
David Leary: [00:33:38] I think we're gonna see a noticeable difference in people in these surveys, come fall, when schools reopen and kids go back to school because you're gonna be working from home; you're already a little bit more productive than you were, working at the office. By the time fall gets here, you're gonna be a lot better at working from home. Now, you take out this ... I'm not gonna use ... It is a weight, right? You're having your kids at home, and you're trying to work at home is a weight. 
Blake Oliver: [00:34:01] Oh, it's so hard. 
David Leary: [00:34:01] Now, you take all these people working at home, and you just cut that weight. How productive are people gonna be?
Blake Oliver: [00:34:10] Tech is leading the way. Twitter told employees back in May that they could work from home permanently. Facebook has announced that they're going to shift things so that over the next decade, half of its 45,000 employees will be able to work from home all the time. Shopify is going to let most employees work remotely in the future. LinkedIn, in the past month, has seen a 28-percent increase in remote job postings, and a 42-percent increase in searches for remote or work from home. That's according to the Wall Street Journal - an article called: "For Many, Remote Work is Becoming Permanent in Wake of Coronavirus."
David Leary: [00:34:47] I could see this. I mean, even let's take something very inside baseball here, right? I'm here in Tucson, Arizona. Intuit has their big, huge call center here. They do all the accountant support. It's closed. Essentially, this call center's closed, and everybody's working from home. I haven't heard any ... Intuit just keeps chugging along. I haven't heard any rumors or rumblings of, oh, people can't get the support they want. I've not heard accountants complaining - support has dropped, or the level of support I get; any complaints against Intuit about this. So, you're right, people are gonna question - do you need a building? Do you need desks? Can you have people work at home? It's pretty clear that it hasn't impacted things drastically, as much as people maybe thought in the last decade, fighting the idea of working from home.
Blake Oliver: [00:35:31] There's a big question, too, as to what this means for big cities. Are people going to flee the big cities? We don't really have a lot of data showing that people are moving yet, but that could be because a lot of people aren't selling their homes. There has been just a real shrinkage in the inventory on the market in homes, because, think about it, you're selling a home. You don't necessarily want a bunch of people with COVID-19 walking through your house doing open houses. You may be uncertain about your own job situation. So maybe better not to mix things up.
[00:36:03] So, there's very low inventory, but there's also a ton of demand. People wanna get out of their apartments. They wanna buy houses. If you can work from home, maybe you want a home office. That's exactly the situation that I'm in right now, with my wife, because we're buying a home here in Scottsdale. We decided that we would each get our own office, and we can afford to do it, moving from L.A. ... For the price of a three-bedroom apartment- actually, less than our monthly payment on a three-bedroom apartment in L.A., we can get a five-bedroom home in Arizona. So, I think a lot of people are gonna do this, and it's gonna be interesting ... What's gonna happen to those cities? The prices aren't dropping. Home prices are not dropping, which is unusual in a recession-
David Leary: [00:36:47] Well, if you combine-
Blake Oliver: [00:36:47] - and that might continue.
David Leary: [00:36:49] If you combine that trend - the work-at-home trend - with the ... When the Trump tax cuts originally - what was that? Three years ago? - came out, one of the major things with the tax cuts were the home-interest deductions. Basically, that was punishing people on the coast that had homes that were a million dollars because you were limited on how much you could claim, and they lowered that down. But if you moved to another part of the country, or you moved out to the suburbs, where homes were a little bit cheaper, you got to take advantage- you could still take advantage of that tax credit.
[00:37:20] So, you combine tax policy, which is affecting social policy of where people live; combine it with the work-from-home, absolutely, there's probably gonna be a rush to the suburbs. Not to mention, I think, just during lockdown, I know people in New York ... There's just not a lot places you can go. If you have your- 
Blake Oliver: [00:37:35] Nope. It's not very fun.
David Leary: [00:37:36] If you're in the suburbs, you can at least go out to your patio. You can go outside, and nobody's around you. You can still socially distance, but have some elbow room. So, I could see ... I think you're right on that and where that heads. 
Blake Oliver: [00:37:49] Now, there are two issues with leaving the city. One is internet access. We have really terrible broadband-internet access in rural America. By global standards, it's actually pretty darned bad. A lot of times, it's because we have one provider that has a monopoly over the area, like Comcast, or whatever. There's virtually no incentive for them to upgrade to fiber optic in a city of 50,000 people because they've already got the market, and the people are paying for it. So, why would I, as a cable company, invest to improve service when I'm not gonna be able to charge that much more?
David Leary: [00:38:27] Because you would get a tax break? Tax policy could affect that ...
Blake Oliver: [00:38:31] Maybe. Well, but they've been pursuing the opposite strategy. I just listened to a Planet Money episode called, "Small America versus Big Internet," on- 
David Leary: [00:38:41] Oh, that's a good. I listened to that. It was a good one.
Blake Oliver: [00:38:43] Yeah. It's about a town - I forget the name of the town - in North Carolina, I believe; about 50,000 people that decided to build its own fiber-optic internet because they couldn't convince the cable company to do it. Then, the way that the cable companies responded was to lobby the state legislature to pass a law to prevent local governments from building their own fiber-optic networks and creating a utility, essentially, out of internet access. So, that's gonna be a big challenge. 
[00:39:10] This one city was able to get an exemption, so they still have and operate their own gigabit-ethernet service, which is very successful and has actually made the city kind of an oasis - a place you can move and live in a small town ... Well, it's a small city - 50,000 people - and still have the ability to get high-speed internet. But, yeah, that's preventing a lot of the movement out, I think, and we have to figure out how to overcome that.
David Leary: [00:39:35] If people move to work remote, that's gonna create additional demand, which maybe-
Blake Oliver: [00:39:38] Right.
David Leary: [00:39:39] -companies will invest in the infrastructure, once the demand's there. 
Blake Oliver: [00:39:41] There's something like two dozen, maybe 20 states, that have passed these laws. So, maybe that will get undone as a result of that - the pressure. The other problem with people working from home, which is happening right now, especially in places where people live in one state and work in another one, like in the New York area, is the state tax nexus problem of people working from home. All these states on the East Coast, like New Jersey, New York, Connecticut, have reciprocal arrangements, or they've worked out deals where people only have to pay taxes in one state. If you live in New Jersey, but you work in New York, you pay your taxes in New York, or you pay it where you live. I don't know how exactly it works, but that way you don't have to file two state tax returns.
[00:40:27] The problem right now is you've got people who normally work in New York who now are working in New Jersey at their house, or in Connecticut at their house, but the company has an office in New York, and that's where it's headquartered. Or my situation, right? My company is headquartered in California. I was living there, but now I'm in Arizona, so we had to change my tax residency. I don't know what that's gonna do for the company. So, it's creating lots of issues for both companies and potentially employees.
David Leary: [00:40:56] Well, I can tell you, right now, because my wife has a rental house in California, and just because of that, we have to file a California return every single year. California wants to know how many days we visited the state of California, and they adjust it off of that. So, you're gonna have fun when you do your taxes in the state of California in this because, you're right, states don't have any type of agreements. So, it's a land-grab of getting every dollar and squeezing you for every minute you spent in that state. You're gonna have fun doing your taxes in California this year. 
Blake Oliver: [00:41:25] Well, that's a pain - the state tax nexus, the internet access. But you know what is really nice, David, is the ability to not wear pants while you're working. We actually have data on this; thank you to Going Concern for reporting another Fishbowl survey. Apparently, one in 10 professionals are video-conferencing in their underwear. Have you ever done this? Have you ever been guilty of it?
David Leary: [00:41:50] No, I just ... Whatever I'm wearing ... I don't even care. Just show up. No brushing teeth; no combing the hair; I just get on the call.
Blake Oliver: [00:41:58] So, apparently, men are three times more likely than women to report going pants-less on Zoom, with men coming in at 14 percent versus five percent for women. Three percent, though, are still putting on a suit to video chat. That is kind of crazy. 75 percent of respondents are putting on some kind of pants, even if those are PJs. Half of women responded that they have stopped wearing makeup completely; where, on the men's side, about 30 percent have given up shaving. 
David Leary: [00:42:25] So, just so I'm hearing these numbers correctly, I'm on a Zoom call, and there's seven men in this one Zoom call. One of those seven will not be wearing pants? Is this the stat? 
Blake Oliver: [00:42:34] On average, yes. On, average ... 
David Leary: [00:42:39] Wow! So, every Zoom call you're in, somebody is not wearing pants, basically, if it's a group chat, or group call.
Blake Oliver: [00:42:43] Potentially, yeah.
David Leary: [00:42:45] Amazing!
Blake Oliver: [00:42:45] I know. 
David Leary: [00:42:46] Well, and then, since that's the average, that means, sometimes, you're in a meeting, and xix of the seven may not be wearing pants! 
Blake Oliver: [00:42:51] Actually, you know what's more likely is that at least, if you're on a call with 10 people, about four of them have started drinking already because 42 percent of employees say they drink while working from home, according to another Fishbowl survey as reported in Going Concern.
David Leary: [00:43:07] Well, if you use a Zoom background, and you keep the drink further enough back, it goes behind the virtual background, and nobody can see your drink. 
Blake Oliver: [00:43:11] Right. Nobody can see your drink. So, uh ...
David Leary: [00:43:15] I have some exciting app news for you, Blake. Super-exciting app news-
Blake Oliver: [00:43:18] All right.
David Leary: [00:43:19] -and it's just for you, ultimately.
Blake Oliver: [00:43:22] Let's do it.
David Leary: [00:43:28] So, remember, I don't know, like two years ago, you got your little Apple credit card. Do you remember that? 
Blake Oliver: [00:43:36] Mm-hmm. Yeah, well, that was actually- that was actually just last year.
David Leary: [00:43:39] Okay. You were so excited about your Apple credit card, and how slick it is, and it works with your phone, and all this stuff. Then, you were like- 
Blake Oliver: [00:43:45] No, no, I wasn't excited about it. I just liked the discount. The three-percent off on the Apple credit, yeah. 
David Leary: [00:43:50] Then, you started to get in there, and you were disappointed because it didn't connect to Mint, or Quicken, or QuickBooks. You were disappointed that the data was just locked up in the app.
Blake Oliver: [00:44:00] Yes, that is just ridiculous. There's no statements. 
David Leary: [00:44:02] Apple quietly ... This was on a website Appleosophy. Think like philosophy, but put the word "Apple" in the middle of the word. So, this article came out: the new IOS 13.5, they snuck in a little feature. If you have the Apple credit card, it now can export to Quicken Financial Exchange, the QFX file, and the QuickBooks QBO file. There's no bank-feed integrations yet ... 
Blake Oliver: [00:44:29] Eh! 
David Leary: [00:44:29] But you can manually download the two file types. The best part of this article is the artwork that this person went and selected. It's essentially the Quicken logo, which Intuit doesn't even own anymore, right? The Quicken logo from 12 years ago, and the QuickBooks logo from 12 years ago.
Blake Oliver: [00:44:46] Oh, no ... 
David Leary: [00:44:46] So, congratulations, Apple. In 2020, halfway through 2020, you basically now support the file formats of QuickBooks, and Quicken from a decade-plus ago. We're in the world of bank feeds, and they're just now adding this to their credit card feed.
Blake Oliver: [00:45:02] That's great.
David Leary: [00:45:02] I thought that was interesting. I have to do one other thing about the AICPA, if you wanna jump to that, but ... 
Blake Oliver: [00:45:07] I have some app news. 
David Leary: [00:45:09] Okay. 
Blake Oliver: [00:45:10] So, now, you can set up and manage time off in TSheets. I guess they did not have this feature before. Let me dig into the article and see how this works.
David Leary: [00:45:19] Really?
Blake Oliver: [00:45:21] Yes. So, now, account administrators can set up time-off codes and accruals; admins and managers can enter time off in bulk; admins and managers can approve or deny team members' time-off requests; and depending on the account settings, team members can enter time off, or they can request time off. In both options, team members will see the number of hours they are predicted to have, on the date, for the time off. That's actually a really neat feature that you don't see in every single time-tracking app, or time-sheets app is the ability to predict time off in the future because, a lot of times, you have to schedule this stuff months out.
David Leary: [00:45:57] Yeah, and I'm still surprised - as you think about Intuit's Payroll products, and they're now offering the ability to get health insurance through that, and they do offer a little bit of worker's comp situation through there - that TSheets just isn't rolled in as part of that, as a big ... What do you call those? A big employer benefits-
Blake Oliver: [00:46:15] PEOs or something?
David Leary: [00:46:15] PEOs, right. Yeah, where basically it's payroll and everything else you need for your employee relationship, because Intuit kind of has it in a bunch of pieces, but you have to subscribe to everything separately. It's very disjointed. I'm surprised they haven't pulled this together into one package where you get all this functionality, like time-off requests, and holidays, and insurance, and all the benefits stuff all rolled together into one complete package. Because I think they even work with Guideline 401(k); you can get 401(k) now, through it. So, yeah, it's very disjointed, though. I'm surprised it's not all rolled together.
Blake Oliver: [00:46:47] Yeah, I wouldn't be surprised if they eventually come up with a per-employee, all-inclusive type deal. That seems like it would be appealing. I got one other app update for you. This is a fundraising round from something I've never heard about. It's an app called Stackin'. S-T-A-C-K-I-N-'; Stackin', like you're "stackin'" bills? They have raised $12.6 million in a Series-B to help millennials navigate the crowded fintech space.
[00:47:12] So, this app, apparently it helps you, via text message, learn how to handle your money by helping you figure out what apps to use. Should you use Robinhood, Stash, Public, Acorns, or Truebill? How do you save money? How much should you save? What kind of 401(k) should you set up? They do this all via text messaging, and they find people; they find customers, advertising on platforms, like TikTok, Snapchat, and Instagram. This TechCrunch article that I'm reading says to think of Stackin' as a more friendly and less nerdy robo-advisor that sends you advice on how to save and, from time to time, recommends an app that you might enjoy in the fintech space. 
David Leary: [00:47:53] So, basically, it's like NerdWallet, but via text messages. 
Blake Oliver: [00:47:58] NerdWallet for millennials and Gen Zers, yeah. 
David Leary: [00:48:00] Hmm. All right, that'll be an interesting one to watch.
Blake Oliver: [00:48:04] It's kind of amazing to me that they're basically just a text-messaging advisor that refers you to other apps; has raised $12.6 million in a Series-B to basically just do that. They don't have their own investment platform or anything, and they don't even have their own [crosstalk] 
David Leary: [00:48:21] It's an advertising model; It's an advertising model.
Blake Oliver: [00:48:23] Right. 
David Leary: [00:48:23] They're just providing a service for these fintech companies that are now taking gigantic rounds. They need to spend that money on advertising, so they're gonna get their piece of that. The startup cycle just [crosstalk] keeps going- 
Blake Oliver: [00:48:32] They pay Stackin'? 
David Leary: [00:48:32] Yeah. They pay Stackin', and Stackin''s paying Facebook, and TikTok, and all the other platforms that advertise ... It's just- it's that startup cycle. This money, it's kinda ... [crosstalk]  
Blake Oliver: [00:48:48] So, Stackin', to give you some numbers, put some numbers on this, Stackin' added one million active users in a little over a year, and it has sent more than 100 million text messages to date, and they don't even have their own text-messaging platform. They're built on top of Twilio. So, they actually spend most of their money paying Twilio, and they're not yet profitable. So, you've got the flow of money is Robinhood wants to get users, so they pay Stackin' to advertise to Stackin''s eyeballs, and then Stackin' pays Twilio to send all those 100 million text messages.
David Leary: [00:49:24] It's bizarre-o, the way some of this stuff [crosstalk] 
Blake Oliver: [00:49:27] But I'm amazed that ... Yeah, I'm amazed that TikTok is a way to acquire customers for your fintech. That's pretty cool. I'm still not on a TikTok, and I feel like I'm getting old. I'm falling behind. I gotta figure this out.
David Leary: [00:49:42] I created an account. I have not put any videos on. I've watched- I'm starting to get it a little bit, but ... I was thinking we could do something kind of interesting. We could record a clip of the show, and put it on there, and then people could remix and do crazy things with our voice. I don't know- 
Blake Oliver: [00:49:56] Yes! The show should be on TikTok. 
David Leary: [00:49:57] I'm still trying to take it in, what it is. I'm just trying to relate to my kids here. I have to relate to my kids because what I'm gonna make them do this summer is gonna make them hate me.
Blake Oliver: [00:50:10] What's that? What are you gonna make them do?
David Leary: [00:50:12] So, the AICPA offers free online accounting learning tools for high school students.
Blake Oliver: [00:50:17] Oh ... All right.
David Leary: [00:50:18] The AICPA has released several free online educational resources for teachers, parents, and others to use to educate students about accounting and personal finance basics. One of the games, Blake- this sounds like fun. I mean, I cannot wait to tell my kids about this. It's called Bank On It. It challenges-
Blake Oliver: [00:50:36] Bank what? 
David Leary: [00:50:36] Bank On It. Bank On It. 
Blake Oliver: [00:50:36] Bank On It. 
David Leary: [00:50:36] It challenges students' knowledge of accounting principles and personal finance planning with real working-world scenarios. So, Blake, if, you know, you're my kid ... I'm like, "Hey, Blake, why don't you go on and do this online quiz? It's a challenge. I challenge you to take some time away from Fortnite and do this, Blake." What is the acceptable amount of questions you would accept in this quiz?
Blake Oliver: [00:51:04] Uh, like 10.
David Leary: [00:51:06] Okay ... When you got your CPA, and you took all the CPA exams, how many questions were on those quizzes?
Blake Oliver: [00:51:13] Oh, I've erased that from my memory. I have-
David Leary: [00:51:16] C'mon ... 
Blake Oliver: [00:51:16] Hundreds! 
David Leary: [00:51:16] Hundreds, okay. 
Blake Oliver: [00:51:18] Yeah.
David Leary: [00:51:19] This game features more than 2,200 questions!
Blake Oliver: [00:51:23] Oh, boy. Your kids are gonna love you, David.
David Leary: [00:51:26] 2,200 in a quiz geared towards high school kids.
Blake Oliver: [00:51:32] So, hey, everybody listening, in about a month when we record, four or five episodes from now, I fully expect David's children to have run away from home. So, if you know where they are, let us know. He apologizes for making them take this AICPA course-
David Leary: [00:51:47] But they don't have to run away from home, Blake, because they can take in AICPA virtual field trip with tours, with 14 CPAs across different industries to explore the rules-
Blake Oliver: [00:51:58] Wait ... Where do you go on your virtual field trip? 
David Leary: [00:52:01] You go to, apparently, a CPA office, and you explore their role to give you an inside scoop on what it's like to be an accountant.
Blake Oliver: [00:52:10] This is a course that you can take on the AICPA site?
David Leary: [00:52:13] It's a virtual field trip. It's actually called Virtual Field Trips. 
Blake Oliver: [00:52:17] Wow.
David Leary: [00:52:18] So, yeah, we'll see how this goes. I'm gonna have my kids do this.
Blake Oliver: [00:52:23] A field trip to an accounting firm is pretty great, but when you make it virtual, I would ... Your kids must be so excited. Have you broken the news to them yet?
David Leary: [00:52:31] No, I have not. I have not told them about this yet.
Blake Oliver: [00:52:34] Oh, okay. You should record that for TikTok. That'd be good - the reaction.
David Leary: [00:52:38] Hey, kids, guess what you're doing all summer? 
Blake Oliver: [00:52:39] Here's what you're doing for summer school.
David Leary: [00:52:41] It's a tour every week; you get to go on a tour with another accountant.
Blake Oliver: [00:52:46] Do your kids ...?  I have a question because my son's five, and he doesn't really understand what I do. He knows that I do a podcast. He has to go in his room and be quiet, and he's really good about that. What do your kids think about what you do for a living?
David Leary: [00:53:02] At some level, it's not conceptual, because it's all on the computer, right? So, they're very much, "You just sit on your computer all day, Dad!" Which justifies them sitting on an Xbox, right? 
David Leary: [00:53:12] Right, right.
David Leary: [00:53:13] They don't equate it to, as a business. I have made them do some work, when they've been out of school, I've made them update some records in Salesforce, which is just drudgery. I've had my daughter do that. I introduced them to Excel, and Google Sheets, and they made a formula, and data just updated - blew their minds. So, they're tiptoeing in the waters. Now, my daughter's actually starting to understand the concept of what QuickBooks is for. Before, they didn't really get it, but they're starting to ... Yeah, they're starting to tiptoe in the waters here. I have to be careful. I don't wanna turn them off to the industry.
Blake Oliver: [00:53:48] Right, right, right. 
David Leary: [00:53:48] But they're starting to tiptoe in the waters here with this stuff.
Blake Oliver: [00:53:50] All right. Well, that's good. I think the spreadsheet skills is awesome. Really important for anyone. I think that's about it. Right, David?
David Leary: [00:53:58] I don't think I have anything else, other than make sure- tell your clients, if they can't find their check, it might come as a debit card, but it's not a fake debit card. You know, you get that junk mail that has the fake-looking credit cards? Apparently, the stimulus checks look like a fake-looking credit card, and people are throwing them away. Be careful.
Blake Oliver: [00:54:17] Don't throw away your stimulus money. If you wanna give us a call and let us know what you think about anything we've talked about on the show, call us at (202) 695-1040. That is (202) 695-1040. It's a Google Voice mailbox; goes straight to voicemail. You can leave a message. We'll take a listen and maybe we'll even play it on the air. You're also welcome to get in touch with me on Twitter. I'm @BlakeTOliver. And how about you, David?
David Leary: [00:54:44] I'm @DavidLeary on Twitter, and @DavidLeary on LinkedIn. I don't know what- I'm something- "The David Leary," I think, on TikTok. 
Blake Oliver: [00:54:53] All right. Well, now I'm gonna have to set up an account so that we can figure out how to do this, because if we can get Lorilyn Wilson to-   we need somebody to do that Donald Trump thing, where the comedians lip sync to us [crosstalk] 
David Leary: [00:55:09] That's exactly it, right? People could- we could put up a recording of the podcast, a snippet, and then people can pretend they're us. I don't know. It's gonna be bad ... There's nothing good that can come out of this ... 
Blake Oliver: [00:55:20] Oh ... Well, David, until next week, have a great rest of your Sunday. Let's hope that the country doesn't burn down between now and the next time we record. Hopefully, in the end, things change for the better.
David Leary: [00:55:37] Yeah. Hugs and be safe, everybody. It'll be interesting - yeah, you're right- to see where we are seven days from now.

Blake Oliver: [00:55:44] Talk to you later. 


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