Small hole in exhaust

[peanut]

It was above 50 today so I took the bike out. While coaxing it to start I noticed movement from under the bike. Ends up there is a small hole in the exhaust. I smelled it and put a finger in it, seemed like water. I figured it wouldn't damage the bike and went for my ride. When I got back home I noticed there were 2 puddles on the ground. The spray was pretty large at first, so I think it hit the back tire and dripped down.

After doing some searching, people seem to say just patch or replace it. Seems like an odd spot for a hole though. Is the interior of the pipe compromised? Anyone had this happen before?

Edit: picture is upside down, sorry