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Expensify Announces Q2 2023 Results

Expensify Card interchange increased by 56% as compared to the previous period last year. Company repurchased $3.9 million in common shares (including $0.9 million of net share settlement on equity awards), decreased outstanding debt by $8.2 million.

Expensify, Inc. (Nasdaq: EXFY), a payments superapp that helps individuals and businesses around the world simplify the way they manage money across expenses, corporate cards and bills, today released a letter to shareholders from Founder and CEO David Barrett alongside results for its quarter ended June 30, 2023.

A Message From Our Founder

This is an exciting time for the expense management industry. As long predicted, our major competitors have abandoned their interchange-only business models and announced a transition to Expensify-style subscription pricing plans. This welcome change signals the beginning of the end of this strange, distorted period where free options were being dumped into the industry at a perpetual loss. We knew it couldn't last forever, and we're thankful that reality is starting to sink in, because Expensify's ultimate strength is its amazing unit economics.

With twelve consecutive quarters of profitability (on an Adjusted EBITDA basis), we have spent our entire history gearing up for a long and grueling battle in the trenches, and we relish the fight. While weathering the combined fire of our competition in the current, tiny, heavily contested corner of the market, we believe we are the only ones genuinely preparing for the next order of magnitude, targeting the 100MM+ businesses in the world that have never heard of any of us. And those preparations are going great:

  • We deployed our cross-platform, open-source, universal chat foundation at multiple real world conferences, acquiring 3x the leads that our booth traditionally has -- while enabling a presence at 10x the conferences at 1/10th the cost of attending physically. After all, it doesn't matter what the conference is about: if it's for business, every single attendee is likely to file an expense report after.
  • We began our first real world expense reimbursements on the New Expensify platform, proving out the "universal" nature of our chat-first payment design -- and are aggressively porting over more advanced cases to begin testing with live customers.
  • We activated ChatGPT for high quality, high scale, real time content moderation, and are beginning to incorporate it throughout our chat-first sales, support, and product design.

On top of these major investments in revolutionary product design, we plan to continue making a full court press with evolutionary enhancements to our SDRs, SEO, SEM, dedicated sales, account management, and other more traditional growth tools, all of which are showing strong improvement. But the real opportunity is still in cracking open a market 10-100x larger than what we've ever seen before. Building this vision has admittedly taken longer than we estimated, giving more oxygen to our competition than we would have liked. But we remain convinced we are the only ones on the right path towards the biggest opportunity in the shortest time frame, even despite the stiffer than expected headwinds in the near term.

-david

Founder and CEO of Expensify

Second Quarter 2023 Highlights

Financial:

  • Revenue was $38.9 million, a decrease of 10% compared to the same period last year.
  • Utilized $0.4 million cash in operating activities and generated $1.1 million of free cash flow.
  • Net loss was $11.3 million, compared to $8.0 million for the same period last year.
  • Non-GAAP net loss was $1.0 million.
  • Adjusted EBITDA was $2.2 million.
  • Interchange derived from the Expensify Card grew to $2.7 million, an increase of 56% compared to the same period last year.

Business

  • Paid members - Paid members were 742,000, a decrease of 2% from the same period last year.
  • Hosted ExpensiCon 3 - An invite-only conference featuring successful accountants and thought leaders from top global accounting firms.
  • Preferred agreements - Signed preferred partnership agreements with the California Society of Certified Public Accountants and the Texas Society of Certified Public Accountants.
  • Share repurchase - The Company repurchased 625,345 shares during the quarter, representing 0.8% of total outstanding common shares, at a total cost of $3.9 million (including $0.9 million of net share settlement on equity awards). Since the approval of the Company’s share repurchase program in May 2022, the Company has repurchased shares at a total cost of $15.9 million (including $6.9 million of net share settlement on equity awards).
  • Debt reduction - The Company reduced its outstanding debt balance by $8.2 million during the quarter.
  • Global reimbursement - The Company expanded its employee reimbursement functionality; businesses can now reimburse employees in over 154 different currencies in more than 200 countries.

Financial Outlook

Expensify's outlook statements are based on current estimates, expectations and assumptions and are not a guarantee of future performance. The following statements are forward-looking and actual results could differ materially depending on market conditions and the factors set forth under “Forward-Looking Statements” below. There can be no assurance that the Company will achieve the results expressed by this guidance.

An estimate of expected stock-based compensation for the next four fiscal quarters is as follows, which is driven primarily by the pre-IPO grant of RSUs issued to all employees (which vest quarterly over eight years with approximately six years remaining).

Est. stock-based compensation (millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3 2023

 

Q4 2023

 

Q1 2024

 

Q2 2024

 

Low

 

High

 

Low

 

High

 

Low

 

High

 

Low

 

High

Cost of revenue, net

$

3.4

 

$

4.1

 

$

3.3

 

$

4.0

 

$

3.2

 

$

3.9

 

$

3.1

 

$

3.7

Research and development

 

3.1

 

 

3.6

 

 

3.0

 

 

3.6

 

 

2.9

 

 

3.5

 

 

2.7

 

 

3.3

General and administrative

 

2.1

 

 

2.5

 

 

2.0

 

 

2.4

 

 

1.9

 

 

2.3

 

 

1.8

 

 

2.2

Sales and marketing

 

1.8

 

 

2.2

 

 

1.8

 

 

2.1

 

 

1.7

 

 

2.0

 

 

1.6

 

 

2.0

Total

$

10.4

 

$

12.4

 

$

10.1

 

$

12.1

 

$

9.7

 

$

11.7

 

$

9.2

 

$

11.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Availability of Information on Expensify’s Website

Investors and others should note that Expensify routinely announces material information to investors and the marketplace using SEC filings, press releases, public conference calls, webcasts and the Expensify Investor Relations website at https://ir.expensify.com. While not all of the information that the Company posts to its Investor Relations website is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media and others interested in Expensify to review the information that it shares on its Investor Relations website.

Conference Call

Expensify will host a video call to discuss the financial results and business highlights at 2:00 p.m. Pacific Time today. An investor presentation and the video call information is available on Expensify’s Investor Relations website at https://ir.expensify.com. A replay of the call will be available on the site for three months.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), we provide certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, non-GAAP net loss, and free cash flow.

We believe our non-GAAP financial measures are useful in evaluating our business, measuring our performance, identifying trends affecting our business, formulating business plans and making strategic decisions. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. These non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled metrics or measures presented by other companies. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under GAAP. There are a number of limitations related to the use of non-GAAP financial measures versus comparable financial measures determined under GAAP. For example, other companies in our industry may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance. All of these limitations could reduce the usefulness of these non-GAAP financial measures as analytical tools. Investors are encouraged to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures and to not rely on any single financial measure to evaluate our business. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP is at the end of this press release.

Adjusted EBITDA. We define adjusted EBITDA as net income from operations excluding provision for income taxes, interest and other expenses, net, depreciation and amortization and stock-based compensation.

Non-GAAP net loss. We define non-GAAP net loss as net income (loss) from operations in accordance with US GAAP excluding stock-based compensation.

Free cash flow. We define Free cash flow as net cash (used in) provided by operating activities excluding changes in settlement assets and settlement liabilities, which represent funds held for customers and customer funds in transit, respectively, reduced by the purchases of property and equipment and software development costs.

The tables at the end of the Condensed Consolidated Financial Statements provide reconciliations to the most directly comparable GAAP financial measure to each of these non-GAAP financial measures.

Forward-Looking Statements

Forward-looking statements in this press release, or made during the earnings call, which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1955. These statements include statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth, product developments and their potential impact, our ability to meet our long-term guidance, the amount and timing of any share repurchases and our stock-based compensation estimates and involve known and unknown risks that are difficult to predict. As a result, our actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “goal,” “ambition,” “objective,” “seeks,” “outlook,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to: the impact on inflation on us and our members; our borrowing costs have and may continue to increase as a result of increases in interest rates; our expectations regarding our financial performance and future operating performance; our ability to attract and retain members, expand usage of our platform, sell subscriptions to our platform and convert individuals and organizations into paying customers; the timing and success of new features, integrations, capabilities and enhancements by us, or by competitors to their products, or any other changes in the competitive landscape of our market; the amount and timing of operating expenses and capital expenditures that we may incur to maintain and expand our business and operations to remain competitive; the sufficiency of our cash, cash equivalents and investments to meet our liquidity needs; our ability to make required payments under and to comply with the various requirements of our current and future indebtedness; our cash flows, the prevailing stock prices, general economic and market conditions and other considerations that could affect the specific timing, price and size of repurchases under our stock repurchase program or our ability to fund any stock repurchases; the war in Ukraine and escalating geopolitical tensions as a result of Russia's invasion of Ukraine; our ability to effectively manage our exposure to fluctuations in foreign currency exchange rates; the increased expenses associated with being a public company; the size of our addressable markets, market share and market trends; anticipated trends, developments and challenges in our industry, business and the highly competitive markets in which we operate; our expectations regarding our income tax liabilities and the adequacy of our reserves; our ability to effectively manage our growth and expand our infrastructure and maintain our corporate culture; our ability to identify, recruit and retain skilled personnel, including key members of senior management; the safety, affordability and convenience of our platform and our offerings; our ability to successfully defend litigation brought against us; our ability to successfully identify, manage and integrate any existing and potential acquisitions of businesses, talent, technologies or intellectual property; general economic conditions in either domestic or international markets; our protections against security breaches, technical difficulties, or interruptions to our platform; our ability to maintain, protect and enhance our intellectual property; and other risks discussed in our filings with the SEC. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. We caution you not to place undue reliance on any forward-looking statements, which are made only as of the date of this press release. We do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

About Expensify

Expensify is a payments superapp that helps individuals and businesses around the world simplify the way they manage money. More than 12 million people use Expensify's free features, which include corporate cards, expense tracking, next-day reimbursement, invoicing, bill pay, and travel booking in one app. All free. Whether you own a small business, manage a team, or close the books for your clients, Expensify makes it easy so you have more time to focus on what really matters.

Expensify, Inc.

Condensed Consolidated Balance Sheets

(unaudited, in thousands, except share data)

 

 

 

 

 

 

 

As of June 30,

 

As of December 31,

 

 

2023

 

2022

Assets

 

 

 

Cash and cash equivalents

$

97,795

 

 

$

103,787

 

Accounts receivable, net

 

14,922

 

 

 

16,448

 

Settlement assets, net

 

39,276

 

 

 

35,838

 

Prepaid expenses

 

5,050

 

 

 

8,825

 

Other current assets

 

24,606

 

 

 

22,217

 

Total current assets

 

181,649

 

 

 

187,115

 

Capitalized software, net

 

8,617

 

 

 

6,881

 

Property and equipment, net

 

14,545

 

 

 

14,492

 

Lease right-of-use assets

 

6,417

 

 

 

745

 

Deferred tax assets, net

 

409

 

 

 

344

 

Other assets

 

749

 

 

 

664

 

Total assets

$

212,386

 

 

$

210,241

 

Liabilities and stockholders' equity

 

 

 

Accounts payable

$

1,691

 

 

$

1,059

 

Accrued expenses and other liabilities

 

11,650

 

 

 

9,070

 

Borrowings under line of credit

 

15,000

 

 

 

15,000

 

Current portion of long-term debt, net of original issue discount and debt issuance costs

 

557

 

 

 

551

 

Lease liabilities, current

 

278

 

 

 

800

 

Settlement liabilities

 

32,500

 

 

 

33,882

 

Total current liabilities

 

61,676

 

 

 

60,362

 

Lease liabilities, non-current

 

6,226

 

 

 

 

Other liabilities

 

1,441

 

 

 

1,204

 

Long-term debt, net of original issue discount and debt issuance costs

 

43,180

 

 

 

51,434

 

Total liabilities

 

112,523

 

 

 

113,000

 

Commitments and contingencies

 

 

 

Stockholders' equity:

 

 

 

Preferred stock, par value $0.0001; 10,000,000 shares of preferred stock authorized as of June 30, 2023 and December 31, 2022; no shares of preferred stock issued and outstanding as of June 30, 2023 and December 31, 2022

 

 

 

 

 

Common stock, par value $0.0001; 1,000,000,000 shares of Class A common stock authorized as of June 30, 2023 and December 31, 2022; 68,347,794 and 68,238,245 shares of Class A common stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively; 24,996,238 and 24,997,561 shares of LT10 common stock authorized as of June 30, 2023 and December 31, 2022, respectively; 7,334,868 and 7,336,191 shares of LT10 common stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively; 24,999,020 shares of LT50 common stock authorized as of June 30, 2023 and December 31, 2022; 7,093,829 and 6,854,931 shares of LT50 common stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

7

 

 

 

7

 

Additional paid-in capital

 

216,422

 

 

 

194,807

 

Accumulated deficit

 

(116,566

)

 

 

(97,573

)

Total stockholders' equity

 

99,863

 

 

 

97,241

 

Total liabilities and stockholders' equity

$

212,386

 

 

$

210,241

 

Expensify, Inc.

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except share and per share data)

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

2022

 

2023

 

2022

Revenue

$

38,884

 

 

$

43,162

 

 

$

78,985

 

 

$

83,532

 

Cost of revenue, net (1)

 

16,925

 

 

 

15,876

 

 

 

32,700

 

 

 

30,010

 

Gross margin

 

21,959

 

 

 

27,286

 

 

 

46,285

 

 

 

53,522

 

Operating expenses:

 

 

 

 

 

 

 

Research and development (1)

 

5,094

 

 

 

3,584

 

 

 

10,512

 

 

 

7,285

 

General and administrative (1)

 

11,712

 

 

 

15,432

 

 

 

24,141

 

 

 

29,438

 

Sales and marketing (1)

 

14,714

 

 

 

12,244

 

 

 

23,897

 

 

 

25,616

 

Total operating expenses

 

31,520

 

 

 

31,260

 

 

 

58,550

 

 

 

62,339

 

Loss from operations

 

(9,561

)

 

 

(3,974

)

 

 

(12,265

)

 

 

(8,817

)

Interest and other expenses, net

 

(1,367

)

 

 

(1,955

)

 

 

(2,783

)

 

 

(2,856

)

Loss before income taxes

 

(10,928

)

 

 

(5,929

)

 

 

(15,048

)

 

 

(11,673

)

Provision for income taxes

 

(376

)

 

 

(2,065

)

 

 

(2,201

)

 

 

(3,697

)

Net loss

$

(11,304

)

 

$

(7,994

)

 

$

(17,249

)

 

$

(15,370

)

Net loss per share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.14

)

 

$

(0.10

)

 

$

(0.21

)

 

$

(0.19

)

Weighted average shares of common stock used to compute net loss per share:

 

 

 

 

 

 

 

Basic and diluted

 

82,011,477

 

 

 

80,473,097

 

 

 

81,890,624

 

 

 

80,311,053

 

 

(1) Includes stock-based compensation expense as follows:

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six months ended June 30,

 

2023

 

2022

 

2023

 

2022

Cost of revenue, net

$

3,600

 

$

4,704

 

$

6,906

 

$

9,611

Research and development

 

2,455

 

 

1,877

 

 

4,661

 

 

4,298

General and administrative

 

2,376

 

 

5,463

 

 

5,020

 

 

10,439

Sales and marketing

 

1,910

 

 

2,004

 

 

3,758

 

 

4,080

Total stock-based compensation expense

$

10,341

 

$

14,048

 

$

20,345

 

$

28,428

 

 

 

 

 

 

 

 

Expensify, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net loss

$

(17,249

)

 

$

(15,370

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

2,789

 

 

 

2,735

 

Reduction of operating lease right-of-use assets

 

334

 

 

 

358

 

Loss on impairment, receivables and sale or disposal of equipment

 

402

 

 

 

475

 

Stock-based compensation expense

 

20,345

 

 

 

28,428

 

Amortization of original issue discount and debt issuance costs

 

49

 

 

 

21

 

Deferred tax assets

 

(65

)

 

 

(319

)

Changes in assets and liabilities:

 

 

 

Accounts receivable, net

 

1,358

 

 

 

(906

)

Settlement assets, net

 

(5,244

)

 

 

(8,999

)

Prepaid expenses

 

3,775

 

 

 

2,006

 

Related party loan receivable

 

 

 

 

14

 

Other current assets

 

(952

)

 

 

1,193

 

Other assets

 

(88

)

 

 

2

 

Accounts payable

 

632

 

 

 

(1,583

)

Accrued expenses and other liabilities

 

2,670

 

 

 

(1,366

)

Operating lease liabilities

 

(294

)

 

 

(404

)

Settlement liabilities

 

(1,382

)

 

 

19,910

 

Other liabilities

 

128

 

 

 

963

 

Net cash provided by operating activities

 

7,208

 

 

 

27,158

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(479

)

 

 

(267

)

Software development costs

 

(2,043

)

 

 

(468

)

Net cash used in investing activities

 

(2,522

)

 

 

(735

)

Cash flows from financing activities:

 

 

 

Principal payments of finance leases

 

(404

)

 

 

(394

)

Principal payments of term loan

 

(8,300

)

 

 

(297

)

Repurchases of early exercised stock options

 

(13

)

 

 

(20

)

Proceeds from common stock purchased under Matching Plan

 

2,076

 

 

 

1,188

 

Proceeds from issuance of common stock on exercise of stock options

 

125

 

 

 

519

 

Payments for employee taxes withheld from stock-based awards

 

(1,524

)

 

 

 

Repurchase and retirement of common stock

 

(3,000

)

 

 

 

Net cash (used in) provided by financing activities

 

(11,040

)

 

 

996

 

Net (decrease) increase in cash and cash equivalents and restricted cash

 

(6,354

)

 

 

27,419

 

Cash and cash equivalents and restricted cash, beginning of period

 

147,710

 

 

 

125,315

 

Cash and cash equivalents and restricted cash, end of period

$

141,356

 

 

$

152,734

 

Supplemental disclosure of cash flow information:

 

 

 

Cash paid for interest

$

2,912

 

 

$

1,750

 

Cash paid for income taxes

$

2,251

 

 

$

606

 

Noncash investing and financing items:

 

 

 

Stock-based compensation capitalized as software development costs

$

1,399

 

 

$

 

Right-of-use assets acquired through operating leases

$

6,402

 

 

$

 

Accrued property and equipment

$

373

 

 

$

 

Reconciliation of cash and cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets

 

 

 

Cash and cash equivalents

$

97,795

 

 

$

105,537

 

Restricted cash included in other current assets

 

20,986

 

 

 

16,077

 

Restricted cash included in settlement assets, net

 

22,575

 

 

 

31,120

 

Total cash, cash equivalents and restricted cash

$

141,356

 

 

$

152,734

 

 

 

 

 

Expensify, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(unaudited, in thousands, except percentages)

 

 

 

Adjusted EBITDA and Adjusted EBITDA Margin

 

 

 

 

Three Months Ended June 30,

 

 

2023

 

2022

Net loss

$

(11,304

)

 

$

(7,994

)

Net loss margin

 

(29

)%

 

 

(19

)%

Add:

 

 

 

Provision for income taxes

 

376

 

 

 

2,065

 

Interest and other expenses, net

 

1,367

 

 

 

1,955

 

Depreciation and amortization

 

1,376

 

 

 

1,582

 

Stock-based compensation

 

10,341

 

 

 

14,048

 

Adjusted EBITDA

$

2,156

 

 

$

11,656

 

Adjusted EBITDA margin

 

6

%

 

 

27

%

 

 

 

 

Non-GAAP Net Loss and Non-GAAP Net Loss Margin

 

Three Months Ended June 30,

 

2023

 

2022

Net loss

$

(11,304

)

 

$

(7,994

)

Net loss margin

 

(29

)%

 

 

(19

)%

Add:

 

 

 

Stock-based compensation

 

10,341

 

 

 

14,048

 

Non-GAAP net loss

$

(963

)

 

$

6,054

 

Non-GAAP net loss margin

 

(2

)%

 

 

14

%

 

 

 

 

Adjusted Operating Cash Flow and Free Cash Flow

 

Three Months Ended June 30,

 

2023

 

2022

Net cash (used in) provided by operating activities

$

(434

)

 

$

15,935

 

(Increase) decrease in changes in assets and liabilities:

 

 

 

Settlement assets

 

(2,561

)

 

 

(3,310

)

Settlement liabilities

 

(644

)

 

 

7,477

 

Adjusted operating cash flow

 

2,771

 

 

 

11,768

 

Less:

 

 

 

Purchases of property and equipment

 

(451

)

 

 

(88

)

Software development costs

 

(1,173

)

 

 

26

 

Free cash flow

$

1,147

 

 

$

11,706

 

 

 

 

 

 

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