Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $36.1 million, representing an 8% year-on-year increase [3] - Average paid members decreased by 5% year-on-year to 657,000 [3] - Total interchange increased by 43% year-on-year to 5.1% [3] - Operating cash flow was $4.8 million, while free cash flow was $9.1 million, marking a 75% increase year-on-year and a 45% increase quarter-on-quarter [4][5] - GAAP net loss was $3.2 million, while non-GAAP net income was $4.8 million, and adjusted EBITDA was $8.4 million [4] Business Line Data and Key Metrics Changes - Expense by card grew to $5.1 million, a 43% increase year-on-year [8] - Quarterly travel expenses saw a 66% quarter-over-quarter increase, with customers adopting travel at twice the rate of the ExpenseMy card [8] Market Data and Key Metrics Changes - April paid members were 655,000, slightly down from Q1, indicating a less than 0.5% decrease [7][55] Company Strategy and Development Direction - The company is focusing on diversifying revenue streams beyond just subscription models, indicating a shift in internal metrics for success [36][37] - A new simplified pricing structure was introduced to enhance customer conversion at the lower end of the market [12][13] - The company is excited about the upcoming Formula One promotion, expecting increased visibility and traction leading to higher sign-ups [20][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to weather economic challenges, citing a strong free cash flow position [32] - The impact of macroeconomic factors and tariffs is being monitored, with customers currently in a cautious holding pattern [49][50] - The anticipated benefits from the Formula One movie are expected to materialize more significantly in Q3 rather than Q2 [39][40] Other Important Information - Full Spanish support has been announced, enhancing product accessibility for Spanish-speaking users [9] - AI features have been integrated into the product to improve expense categorization and fraud detection [16][18] Q&A Session Summary Question: Impact of macro and tariff issues on the business - Management believes they are well-positioned to handle economic challenges, with a strong free cash flow of $9 million [30][32] Question: Disconnect between revenue growth and paid user numbers - Management acknowledged the importance of paid members but emphasized the diversification of revenue streams beyond subscriptions [34][36] Question: Vertical exposure of the customer base to tariff headwinds - Management noted that tracking the impact of tariffs has been challenging, with customers currently in a wait-and-see mode [47][49] Question: Accounting perspective on the Formula One movie's impact - Management explained that while cash flow impacts have been felt, the expense recognition will occur when the movie is released, leading to a significant expense in the income statement [56][57]

[Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements that are subject to significant risks and uncertainties - This quarterly report contains numerous forward-looking statements involving significant risks and uncertainties, intended to be protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[11](index=11&type=chunk) - Forward-looking statements cover company strategy, future financial condition, operations, costs, prospects, plans, and market growth, but do not guarantee future results, activity levels, performance, or events[11](index=11&type=chunk)[12](index=12&type=chunk) - The company undertakes no obligation to update any forward-looking statements unless required by law, and such statements do not reflect the potential impact of future acquisitions, mergers, dispositions, joint ventures, or investments[13](index=13&type=chunk) [Part I - Financial Information](index=7&type=section&id=Part%20I%20-%20Financial%20Information) This part presents the company's unaudited condensed consolidated financial statements and management's discussion of its financial condition and results of operations [Item 1. Condensed Consolidated Financial Statements](index=7&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section contains Expensify, Inc's unaudited condensed consolidated financial statements as of March 31, 2025 [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (USD in thousands) | Metric | Mar 31, 2025 | Dec 31, 2024 | | :--------------------- | :------------- | :------------- | | **Assets** | | | | Cash and cash equivalents | 59,627 | 48,772 | | Accounts receivable, net | 12,555 | 12,701 | | Settlement assets, net | 50,038 | 42,406 | | Total current assets | 153,711 | 136,876 | | Capitalized software, net | 15,232 | 16,232 | | Property and equipment, net | 13,482 | 13,621 | | **Total assets** | **189,236** | **173,680** | | **Liabilities and Stockholders' Equity** | | | | Accounts payable | 526 | 196 | | Accrued expenses and other liabilities | 9,732 | 8,240 | | Settlement liabilities | 36,265 | 28,845 | | Total current liabilities | 47,261 | 38,010 | | **Total liabilities** | **54,585** | **45,437** | | **Total stockholders' equity** | **134,651** | **128,243** | | **Total liabilities and stockholders' equity** | **189,236** | **173,680** | [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :-------------- | :-------------------- | :-------------------- | | Revenue | 36,074 | 33,535 | | Cost of revenue, net | 17,832 | 14,584 | | Gross profit | 18,242 | 18,951 | | Total operating expenses | 19,729 | 20,744 | | Loss from operations | (1,487) | (1,793) | | Other income (expenses), net | 324 | (954) | | Loss before income taxes | (1,163) | (2,747) | | Provision for income taxes | (2,006) | (1,034) | | **Net loss** | **(3,169)** | **(3,781)** | | Net loss per share, basic and diluted | (0.03) | (0.04) | | Weighted-average common shares outstanding, basic and diluted | 91,501,083 | 85,141,411 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Changes in Stockholders' Equity (USD in thousands) - Q1 2025 | Change in Stockholders' Equity | Balance as of Dec 31, 2024 | Stock option exercises | RSU Issuance | Matching Program Common Stock Issuance | Stock-based compensation | Net loss | Balance as of Mar 31, 2025 | | :-------------------- | :----------------- | :----------- | :----------------- | :----------------- | :----------- | :----- | :----------------- | | Capital Stock | 9 | — | — | — | — | — | 9 | | Additional paid-in capital | 279,062 | 91 | 18 | 1,151 | 8,229 | — | 288,639 | | Accumulated deficit | (150,828) | — | — | — | — | (3,169) | (153,997) | | **Total stockholders' equity** | **128,243** | **91** | **18** | **1,151** | **8,229** | **(3,169)** | **134,651** | Changes in Stockholders' Equity (USD in thousands) - Q1 2024 | Change in Stockholders' Equity | Balance as of Dec 31, 2023 | Stock option exercises | RSU Issuance | Matching Program Common Stock Issuance | Stock-based compensation | Net loss | Balance as of Mar 31, 2024 | | :-------------------- | :----------------- | :----------- | :----------------- | :----------------- | :----------- | :----- | :----------------- | | Capital Stock | 8 | — | — | 1 | — | — | 9 | | Additional paid-in capital | 241,509 | 39 | 18 | 913 | 8,439 | — | 251,055 | | Accumulated deficit | (140,773) | — | — | — | — | (3,781) | (144,554) | | **Total stockholders' equity** | **100,744** | **39** | **18** | **914** | **8,439** | **(3,781)** | **106,510** | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (USD in thousands) | Cash Flow | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :---------------- | :-------------------- | :-------------------- | | Net cash from operating activities | 4,805 | 3,471 | | Net cash from investing activities | (498) | (2,829) | | Net cash from financing activities | 1,208 | 845 | | Net increase in cash, cash equivalents, and restricted cash | 5,515 | 1,487 | | Cash, cash equivalents, and restricted cash at beginning of period | 90,834 | 96,658 | | Cash, cash equivalents, and restricted cash at end of period | 96,349 | 98,145 | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1 – GENERAL INFORMATION](index=13&type=section&id=NOTE%201%20%E2%80%93%20GENERAL%20INFORMATION) - Expensify provides a cloud-based expense management platform that integrates with various third-party accounting applications to simplify expense management and bill payments for employees and vendors[30](index=30&type=chunk) - The company also offers the Expensify Card, primarily for U.S. business customers, to control employee spending and compliance in real-time and provide electronic receipt reporting[31](index=31&type=chunk) - As of March 31, 2025, the Expensify Card primarily operates through the Updated Card Program in partnership with The Bancorp Bank, which launched in February 2024[32](index=32&type=chunk) - The company operates as a single reportable segment, with its Chief Operating Decision Maker (CODM) reviewing financial information on a consolidated basis for resource allocation and performance assessment[39](index=39&type=chunk) [NOTE 2 - REVENUE AND CERTAIN STATEMENT OF OPERATIONS COMPONENTS](index=15&type=section&id=NOTE%202%20-%20REVENUE%20AND%20CERTAIN%20STATEMENT%20OF%20OPERATIONS%20COMPONENTS) Revenue by Source (USD in thousands) | Revenue Source | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :---------------- | :-------------------- | :-------------------- | | United States | 33,074 | 30,513 | | Other Regions | 3,000 | 3,022 | | **Total Revenue** | **36,074** | **33,535** | - The company offers cash-back rewards to Updated Card Program customers, calculated monthly based on transaction volume and recorded as a reduction of revenue, amounting to **$2.3 million** and **$2.0 million** in Q1 2025 and Q1 2024, respectively[43](index=43&type=chunk) - Transaction authorization and settlement under the Updated Card Program generate revenue, with the company acting as the principal and recognizing interchange fees on a gross basis; interchange fee revenue was **$5.0 million** in Q1 2025, while the amount was not material in the same period of 2024[44](index=44&type=chunk) - The net vendor rebate for the Legacy Card Program was not material in Q1 2025, compared to **$3.2 million** in the same period of 2024, reflecting the shift of cardholder spending to the Updated Card Program[45](index=45&type=chunk) [NOTE 3 - CERTAIN BALANCE SHEET COMPONENTS](index=16&type=section&id=NOTE%203%20-%20CERTAIN%20BALANCE%20SHEET%20COMPONENTS) Other Current Assets (USD in thousands) | Other Current Assets | Mar 31, 2025 | Dec 31, 2024 | | :-------------------- | :------------- | :------------- | | Expensify Card posted collateral | 11,328 | 12,415 | | Expensify.org restricted cash | 5,987 | 5,972 | | Earned interchange fees restricted cash | 1,750 | 1,442 | | Deferred contract acquisition costs | 400 | 339 | | Income tax receivable | 274 | 429 | | Other restricted cash | 160 | 151 | | Other | 93 | 160 | | **Other current assets** | **19,992** | **20,908** | Capitalized Software, Net (USD in thousands) | Capitalized Software, Net | Mar 31, 2025 | Dec 31, 2024 | | :-------------------- | :------------- | :------------- | | Capitalized software development costs | 33,142 | 32,332 | | Less: Accumulated amortization | (17,910) | (16,100) | | **Capitalized software, net** | **15,232** | **16,232** | - Amortization expense for capitalized software development costs is included in cost of revenue, net, and was **$1.8 million** and **$1.2 million** for Q1 2025 and Q1 2024, respectively[47](index=47&type=chunk) Accrued Expenses and Other Liabilities (USD in thousands) | Accrued Expenses and Other Liabilities | Mar 31, 2025 | Dec 31, 2024 | | :-------------------------- | :------------- | :------------- | | Sales, payroll, and other taxes payable | 2,395 | 2,538 | | Income taxes payable | 2,136 | 934 | | Professional services fees | 1,625 | 1,336 | | Partner expenses and advertising | 1,297 | 1,194 | | Cash-back rewards | 503 | 489 | | Matching program payroll liabilities | 480 | 408 | | Credit card processing fees | 449 | 411 | | Other | 847 | 930 | | **Accrued expenses and other liabilities** | **9,732** | **8,240** | [NOTE 4 - COMMITMENTS AND CONTINGENCIES](index=18&type=section&id=NOTE%204%20-%20COMMITMENTS%20AND%20CONTINGENCIES) - The company fully repaid its **$8.3 million** amortizing term mortgage loan on August 29, 2024, and terminated the related mortgage agreement with CIBC[52](index=52&type=chunk) - In February 2024, the company entered into an amended loan and security agreement with CIBC, providing a **$25.0 million** revolving credit facility, and renewed a **$1.0 million** letter of credit on February 28, 2025, effective until March 20, 2026[53](index=53&type=chunk)[54](index=54&type=chunk) - As of March 31, 2025, there were no borrowings under the revolving credit facility, with **$24.0 million** remaining available for additional borrowing[59](index=59&type=chunk) - As of March 31, 2025, the company had no legal contingencies that would have a material adverse effect on its financial condition, results of operations, or cash flows[61](index=61&type=chunk) [NOTE 5 - STOCK INCENTIVE PLANS](index=19&type=section&id=NOTE%205%20-%20STOCK%20INCENTIVE%20PLANS) - The company grants equity awards to service providers through its 2009 and 2019 Stock Plans, as well as the 2021 Incentive Award Plan and the 2021 Stock Purchase and Matching Plan (2021 Incentive Plans)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) - As of March 31, 2025, the number of shares of Class A common stock available for issuance under the 2021 Incentive Plans was **25,625,898**, up from 20,879,081 as of December 31, 2024[66](index=66&type=chunk) Restricted Stock Unit (RSU) Activity | RSU Activity | Class A Common Stock | LT50 Common Stock | Weighted-Average Grant-Date Fair Value/Share | | :------------------------ | :-------- | :--------- | :------------------------ | | Unvested as of Dec 31, 2024 | 2,150,101 | 1,894,470 | $30.21 | | Vested RSUs | (99,258) | (97,912) | $31.84 | | Canceled/Forfeited/Expired RSUs | (22,401) | (22,401) | $40.97 | | Unvested as of Mar 31, 2025 | 2,028,442 | 1,774,157 | $30.00 | Stock Option Activity | Stock Option Activity | Number of Shares | Weighted-Average Exercise Price/Share | Weighted-Average Remaining Contractual Term (Years) | | :----------- | :-------- | :------------------ | :------------------------ | | Outstanding as of Dec 31, 2024 | 3,759,580 | $2.29 | 4.11 | | Exercised Options | (75,289) | $1.22 | | | Canceled/Forfeited/Expired Options | (3,812) | $5.94 | | | Outstanding as of Mar 31, 2025 | 3,680,479 | $2.31 | 3.88 | | Exercisable as of Mar 31, 2025 | 3,675,549 | $2.30 | 3.88 | Stock-Based Compensation Expense (USD in thousands) | Stock-Based Compensation | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :-------------------- | :-------------------- | :-------------------- | | Matching program shares | 1,527 | 1,430 | | Restricted stock units | 6,077 | 6,260 | | Stock options | 625 | 749 | | **Total stock-based compensation** | **8,229** | **8,439** | | Less: Capitalized software development costs | (239) | (915) | | **Total stock-based compensation expense** | **7,990** | **7,524** | [NOTE 6 - INCOME TAXES](index=23&type=section&id=NOTE%206%20-%20INCOME%20TAXES) - The company recorded an income tax provision of **$2.0 million** and **$1.0 million** in Q1 2025 and Q1 2024, respectively, with effective tax rates of **(172.5)%** and **(37.6)%**[82](index=82&type=chunk) - The difference between the effective and statutory tax rates is primarily due to changes in the valuation allowance and non-deductible stock-based compensation, partially offset by compensation limitations under IRC Section 162(m)[83](index=83&type=chunk) - As of March 31, 2025, the company recorded **$1.6 million** in unrecognized tax benefits, which includes **$0.2 million** for interest and penalties[84](index=84&type=chunk) [NOTE 7 - NET LOSS PER SHARE](index=24&type=section&id=NOTE%207%20-%20NET%20LOSS%20PER%20SHARE) Net Loss Per Share Calculation (in thousands, except per share data) | Net Loss Per Share Calculation | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--------------------------------- | :-------------------- | :-------------------- | | Net loss (basic and diluted) | (3,169) | (3,781) | | Weighted-average common shares used to compute net loss per share (basic and diluted) | 91,501,083 | 85,141,411 | | Net loss per share (basic and diluted) | (0.03) | (0.04) | - Class A, LT10, and LT50 common stock have the same liquidation and dividend rights, resulting in identical net loss per share for each class of common stock[87](index=87&type=chunk) Potentially Dilutive Shares (Excluded as Anti-Dilutive) | Potentially Dilutive Shares | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--------------------------- | :-------------------- | :-------------------- | | Weighted-average stock options | 2,106,034 | 1,490,098 | | Matching shares | 28,145 | — | | **Total** | **2,134,179** | **1,490,098** | [NOTE 8 - EQUITY](index=25&type=section&id=NOTE%208%20-%20EQUITY) - On February 25, 2025, the Executive Committee of the Board of Directors approved a new stock repurchase program (2025 Stock Repurchase Program), authorizing the repurchase of up to **$50.0 million** of Class A common stock, replacing the 2022 program set to expire in March 2025[92](index=92&type=chunk) - As of March 31, 2025, **$50.0 million** remained available under the 2025 Stock Repurchase Program, excluding amounts used for net share settlement of vested equity awards[93](index=93&type=chunk) - The company did not repurchase any shares of Class A common stock under its stock repurchase programs during Q1 2025 or Q1 2024[93](index=93&type=chunk) [NOTE 9 - RELATED PARTY TRANSACTIONS](index=26&type=section&id=NOTE%209%20-%20RELATED%20PARTY%20TRANSACTIONS) - As of March 31, 2025, the company had no material related party transactions[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses Expensify's financial condition and results of operations for the three months ended March 31, 2025 [OVERVIEW](index=27&type=section&id=OVERVIEW) - Expensify provides a cloud-based expense management software platform to help businesses simplify money management, with over **15 million members** and **1.8 billion expense transactions** processed as of March 31, 2025[97](index=97&type=chunk) - For the quarter ended March 31, 2025, an average of **657,000 paid members** from **45,100 companies** across more than 200 countries and territories used the Expensify platform[97](index=97&type=chunk) [MACROECONOMIC TRENDS](index=27&type=section&id=MACROECONOMIC%20TRENDS) - The company's business and its customers, primarily small and medium-sized businesses, are affected by overall economic conditions, with potential negative impacts from slowing economic growth and a potential recession[98](index=98&type=chunk) - Despite some moderation, the economy remains affected by high inflation rates and faces further inflationary risks; tariffs and trade issues also add to economic uncertainty[98](index=98&type=chunk) [Components of Results of Operations](index=28&type=section&id=Components%20of%20Results%20of%20Operations) [Revenue](index=28&type=section&id=Revenue) - Revenue is primarily derived from subscription fees for the cloud-based expense management software platform, billed monthly or annually based on the number of active members and service level[99](index=99&type=chunk) - The company generates interchange fee revenue from the authorization and settlement of Expensify Card transactions under the Updated Card Program and recognizes it on a gross basis as the principal[101](index=101&type=chunk)[102](index=102&type=chunk) - The company offers cash-back rewards to Updated Card Program customers, recorded as a reduction of revenue, with amounts fluctuating based on customer eligibility and payment timing[103](index=103&type=chunk) [Cost of Revenue, Net](index=28&type=section&id=Cost%20of%20Revenue,%20Net) - Cost of revenue, net primarily includes service hosting, credit card processing fees, third-party software license fees, outsourced engineering and customer service costs, amortization of capitalized software development costs, and personnel-related expenses[104](index=104&type=chunk) - The net vendor rebate from the Legacy Card Program, which reduces cost of revenue, was not material in Q1 2025, compared to **$3.187 million** in the same period of 2024[105](index=105&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20Expenses) [Research and Development](index=29&type=section&id=Research%20and%20Development) - Research and development expenses primarily consist of personnel-related costs (including stock-based compensation) and costs for external contributors during the product development and enhancement phases, with some software development costs being capitalized[106](index=106&type=chunk) - The company expects to continue investing in and expanding its products and services to enhance customer experience and satisfaction and to attract new customers[107](index=107&type=chunk) [General and Administrative](index=29&type=section&id=General%20and%20Administrative) - General and administrative expenses primarily consist of personnel-related costs for administrative functions (including stock-based compensation), business insurance, rent, utilities, depreciation, information technology, and external professional services fees[108](index=108&type=chunk) [Sales and Marketing](index=30&type=section&id=Sales%20and%20Marketing) - Sales and marketing expenses primarily consist of personnel-related costs (including stock-based compensation), advertising, depreciation, outsourced sales and product demonstration costs, branding and public relations expenses, and strategic partner referral fees[109](index=109&type=chunk) - The company expects sales and marketing expenses to increase sequentially due to a one-time fee in Q2 2025 for promotional marketing in the Apple movie "F1"[109](index=109&type=chunk) [Other Income (Expenses), Net](index=30&type=section&id=Other%20Income%20(Expenses),%20Net) - Other income (expenses), net includes the operating results of the Fifth & Harvey, LLC subsidiary, interest income, realized gains and losses on foreign currency transactions, foreign currency remeasurement, and interest expense under the CIBC credit facility[110](index=110&type=chunk) [Provision for Income Taxes](index=30&type=section&id=Provision%20for%20Income%20Taxes) - The provision for income taxes primarily consists of income taxes in the United States, United Kingdom, Australia, Netherlands, Canada, and various U.S. states[111](index=111&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) [Revenue](index=32&type=section&id=Revenue_Results) Revenue (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change Amount | Change Percent | | :-------------- | :-------------------- | :-------------------- | :------- | :--------- | | Revenue | 36,074 | 33,535 | 2,539 | 8% | - The increase in revenue was primarily driven by growth in interchange fee revenue, largely due to the shift of cardholder spending from the Legacy Card Program to the Updated Card Program[114](index=114&type=chunk) - This growth was partially offset by a decrease in user base billing activity, including lower pay-per-use activity, and an increase in cash-back payments due to higher Expensify Card adoption and spend[114](index=114&type=chunk) [Cost of Revenue, Net and Gross Margin](index=32&type=section&id=Cost%20of%20Revenue,%20Net%20and%20Gross%20Margin_Results) Cost of Revenue, Net and Gross Margin (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change Amount | Change Percent | | :-------------- | :-------------------- | :-------------------- | :------- | :--------- | | Cost of revenue, net | 17,832 | 14,584 | 3,248 | 22% | | Gross profit | 18,242 | 18,951 | (709) | (4)% | | Gross margin | 51% | 57% | | | - The **22% increase** in cost of revenue, net was primarily due to a decrease in the net vendor rebate as cardholder spending shifted to the Updated Card Program, partially offset by lower SmartScan costs from increased use of AI over human agents[115](index=115&type=chunk) - Gross margin decreased to **51%** in Q1 2025 from 57% in the same period of 2024, primarily due to the changes in revenue and cost of revenue, net[116](index=116&type=chunk) [Operating Expenses](index=32&type=section&id=Operating%20Expenses_Results) [Research and Development](index=32&type=section&id=Research%20and%20Development_Results) Research and Development (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change Amount | Change Percent | | :-------------- | :-------------------- | :-------------------- | :------- | :--------- | | Research and development | 5,358 | 5,929 | (571) | (10)% | - The **10% decrease** in research and development expenses was primarily due to reduced outsourced activities from external contributors on projects and new product features[117](index=117&type=chunk) [General and Administrative](index=33&type=section&id=General%20and%20Administrative_Results) General and Administrative (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change Amount | Change Percent | | :-------------- | :-------------------- | :-------------------- | :------- | :--------- | | General and administrative | 10,829 | 11,431 | (602) | (5)% | - The **5% decrease** in general and administrative expenses was primarily due to lower business insurance costs[118](index=118&type=chunk) [Sales and Marketing](index=33&type=section&id=Sales%20and%20Marketing_Results) Sales and Marketing (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change Amount | Change Percent | | :-------------- | :-------------------- | :-------------------- | :------- | :--------- | | Sales and marketing | 3,542 | 3,384 | 158 | 5% | - The **5% increase** in sales and marketing expenses was primarily due to the timing of sales and marketing activities, partially offset by a decrease in advertising spend[119](index=119&type=chunk) [Other income (expenses), net](index=33&type=section&id=Other%20income%20(expenses),%20net_Results) Other income (expenses), net (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change Amount | Change Percent | | :-------------- | :-------------------- | :-------------------- | :------- | :--------- | | Other income (expenses), net | 324 | (954) | 1,278 | (134)% | - The **134% change** in other income (expenses), net was primarily due to lower interest expense following the repayment of the revolving credit facility and the amortizing term mortgage loan[120](index=120&type=chunk) [Provision for Income Taxes](index=33&type=section&id=Provision%20for%20Income%20Taxes_Results) Provision for Income Taxes (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change Amount | Change Percent | | :-------------- | :-------------------- | :-------------------- | :------- | :--------- | | Provision for income taxes | (2,006) | (1,034) | (972) | 94% | - The **94% increase** in the provision for income taxes, with effective tax rates of **(172.5)%** in 2025 and **(37.6)%** in 2024, was primarily driven by changes in the valuation allowance and non-deductible stock-based compensation[121](index=121&type=chunk)[122](index=122&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) [CASH FLOWS](index=34&type=section&id=CASH%20FLOWS) Cash Flows (USD in thousands) | Cash Flow | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :---------------- | :-------------------- | :-------------------- | | Net cash from operating activities | 4,805 | 3,471 | | Net cash from investing activities | (498) | (2,829) | | Net cash from financing activities | 1,208 | 845 | | Net increase in cash, cash equivalents, and restricted cash | 5,515 | 1,487 | [CASH FLOWS FROM OPERATING ACTIVITIES](index=34&type=section&id=CASH%20FLOWS%20FROM%20OPERATING%20ACTIVITIES) - Net cash provided by operating activities was **$4.8 million** in Q1 2025, up from **$3.5 million** in the same period of 2024, primarily due to increased interchange fee revenue, lower advertising spend, and reduced SmartScan costs, partially offset by decreased subscription revenue[126](index=126&type=chunk) [CASH FLOWS FROM INVESTING ACTIVITIES](index=34&type=section&id=CASH%20FLOWS%20FROM%20INVESTING%20ACTIVITIES) - Net cash used in investing activities was **$0.5 million** in Q1 2025, primarily for software development costs, a decrease from the prior year period mainly due to lower software development costs from employees and external contributors[127](index=127&type=chunk) [CASH FLOWS FROM FINANCING ACTIVITIES](index=34&type=section&id=CASH%20FLOWS%20FROM%20FINANCING%20ACTIVITIES) - Net cash provided by financing activities was **$1.2 million** in Q1 2025, primarily from proceeds from the purchase of common stock under the 2021 Stock Purchase and Matching Plan[128](index=128&type=chunk) [SHARE REPURCHASE PROGRAM](index=34&type=section&id=SHARE%20REPURCHASE%20PROGRAM) - On February 25, 2025, the Executive Committee of the Board of Directors approved a new **$50.0 million** stock repurchase program, replacing the 2022 program that was set to expire in March 2025[130](index=130&type=chunk) - As of March 31, 2025, **$50.0 million** remained available under the 2025 Stock Repurchase Program, excluding amounts used for net share settlement of vested equity awards[130](index=130&type=chunk) [CREDIT FACILITIES](index=35&type=section&id=CREDIT%20FACILITIES) - The company fully repaid its **$8.3 million** amortizing term mortgage loan on August 29, 2024, and terminated the related agreement with CIBC[131](index=131&type=chunk) - The company's 2024 Amended Loan and Security Agreement with CIBC provides a **$25.0 million** revolving credit facility maturing in September 2025, and a **$1.0 million** letter of credit was renewed in February 2025[132](index=132&type=chunk)[133](index=133&type=chunk) - As of March 31, 2025, there were no borrowings under the revolving credit facility, with **$24.0 million** remaining available for additional borrowing[59](index=59&type=chunk) [Certain Covenants](index=36&type=section&id=Certain%20Covenants) - The company is subject to customary covenants under the 2024 Amended Loan and Security Agreement, including restrictions on additional debt, liens, changes in control, mergers, asset sales, dividend payments, acquisitions, investments, or loans[138](index=138&type=chunk) - The company must maintain specific financial covenants, including a Total EBITDA Net Leverage Ratio not to exceed **2.50 to 1.00**[138](index=138&type=chunk) - As of March 31, 2025, the company was in compliance with all debt covenants[139](index=139&type=chunk) [Key Business Metrics and Non-GAAP Financial Measures](index=36&type=section&id=Key%20Business%20Metrics%20and%20Non-GAAP%20Financial%20Measures) [KEY BUSINESS METRICS](index=36&type=section&id=KEY%20BUSINESS%20METRICS) [Paid Members](index=36&type=section&id=Paid%20Members) - Paid members are defined as the average number of users (employees, contractors, volunteers, team members, etc) billed under a Collect or Control plan during any particular quarter[141](index=141&type=chunk) Paid Members (in thousands) | Quarter Ended | Paid Members | | :--------- | :-------------- | | Mar 31, 2025 | 657 | | Mar 31, 2024 | 688 | [NON-GAAP FINANCIAL MEASURES](index=37&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) [Limitations of Non-GAAP Financial Measures](index=37&type=section&id=Limitations%20of%20Non-GAAP%20Financial%20Measures) - Non-GAAP financial measures have limitations as analytical tools and should not be considered a substitute for GAAP financial information, as calculation methods may differ among companies[143](index=143&type=chunk) [Adjusted EBITDA and Adjusted EBITDA Margin](index=37&type=section&id=Adjusted%20EBITDA%20and%20Adjusted%20EBITDA%20Margin) - Adjusted EBITDA is defined as net loss, excluding provision for income taxes, other income (expenses), net, depreciation and amortization, and stock-based compensation expense[144](index=144&type=chunk) Adjusted EBITDA (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :-------------- | :-------------------- | :-------------------- | | Adjusted EBITDA | 8,446 | 7,114 | | Adjusted EBITDA Margin | 23% | 21% | [Non-GAAP Net Income and Non-GAAP Net Income Margin](index=37&type=section&id=Non-GAAP%20Net%20Income%20and%20Non-GAAP%20Net%20Income%20Margin) - Non-GAAP net income is defined as net loss, excluding stock-based compensation expense[146](index=146&type=chunk) Non-GAAP Net Income (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :-------------- | :-------------------- | :-------------------- | | Non-GAAP net income | 4,821 | 3,743 | | Non-GAAP net income margin | 13% | 11% | [Free Cash Flow and Free Cash Flow Margin](index=38&type=section&id=Free%20Cash%20Flow%20and%20Free%20Cash%20Flow%20Margin) - Free cash flow is defined as net cash from operating activities, excluding changes in settlement assets and liabilities, less purchases of property and equipment and software development costs[148](index=148&type=chunk) Free Cash Flow (USD in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :-------------- | :-------------------- | :-------------------- | | Free cash flow | 9,104 | 5,192 | | Free cash flow margin | 25.2% | 15.5% | [Reconciliations of Non-GAAP Financial Measures](index=38&type=section&id=Reconciliations%20of%20Non-GAAP%20Financial%20Measures) Reconciliation of Adjusted EBITDA (USD in thousands) | Reconciliation of Adjusted EBITDA | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :------------------------ | :-------------------- | :-------------------- | | Net loss | (3,169) | (3,781) | | Add: Provision for income taxes | 2,006 | 1,034 | | Add: Other (income) expenses, net | (324) | 954 | | Add: Depreciation and amortization | 1,943 | 1,383 | | Add: Stock-based compensation expense | 7,990 | 7,524 | | **Adjusted EBITDA** | **8,446** | **7,114** | Reconciliation of Non-GAAP Net Income (USD in thousands) | Reconciliation of Non-GAAP Net Income | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :------------------------ | :-------------------- | :-------------------- | | Net loss | (3,169) | (3,781) | | Add: Stock-based compensation expense | 7,990 | 7,524 | | **Non-GAAP net income** | **4,821** | **3,743** | Reconciliation of Free Cash Flow (USD in thousands) | Reconciliation of Free Cash Flow | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :---------------------- | :-------------------- | :-------------------- | | Net cash from operating activities | 4,805 | 3,471 | | (Increase) decrease in settlement assets, net | 12,217 | 6,120 | | (Decrease) increase in settlement liabilities | (7,420) | (1,570) | | Less: Software development costs | (498) | (2,829) | | **Free cash flow** | **9,104** | **5,192** | [Contractual Obligations and Commitments](index=39&type=section&id=Contractual%20Obligations%20and%20Commitments) - As of March 31, 2025, there were no material changes to the company's contractual obligations and commitments from those disclosed in the 2024 Annual Report[152](index=152&type=chunk) [Indemnification Agreements](index=39&type=section&id=Indemnification%20Agreements) - The company enters into indemnification agreements with customers, card-issuing banks, card networks, vendors, and other parties in the ordinary course of business, covering matters such as breach of contract, service delivery, or intellectual property infringement claims[153](index=153&type=chunk) - The company has entered into indemnification agreements with its directors, certain executive officers, and employees; to date, no indemnification demands have been received, and no claims are pending that would have a material adverse effect on the financial condition[153](index=153&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) - During the reporting periods, the company did not have, and does not currently have, any off-balance sheet financing arrangements or relationships with unconsolidated entities or financial partnerships[154](index=154&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The company's condensed consolidated financial statements are prepared in accordance with GAAP, requiring management to make estimates and judgments that affect assets, liabilities, revenue, and expenses[155](index=155&type=chunk) - There have been no material changes to the critical accounting policies and estimates from those disclosed in the 2024 Annual Report[156](index=156&type=chunk) [Recent Accounting Pronouncements](index=40&type=section&id=Recent%20Accounting%20Pronouncements) - For information on recent accounting pronouncements not yet adopted as of the date of this quarterly report, refer to Note 1 of the condensed consolidated financial statements[157](index=157&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that the company's market risk has not materially changed since the disclosure in the 2024 Annual Report - The company's market risk has not materially changed from that disclosed in the 2024 Annual Report[158](index=158&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section assesses the effectiveness of the company's disclosure controls and procedures as of March 31, 2025 - As of March 31, 2025, the company's disclosure controls and procedures were evaluated by management as effective at a reasonable assurance level[159](index=159&type=chunk) - There were no material changes to internal controls during the reporting period, and management recognizes that any controls and procedures can only provide reasonable assurance[160](index=160&type=chunk)[161](index=161&type=chunk) [Part II - Other Information](index=41&type=section&id=Part%20II%20-%20Other%20Information) This part covers legal proceedings, risk factors, and other required disclosures [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section discloses ongoing legal matters, including a securities class action and two shareholder derivative lawsuits - The company is facing a securities class action lawsuit, *Wilhite v. Expensify, Inc., et al.*, alleging false or misleading statements in its IPO documents; the court has partially granted and partially denied the defendants' motion to dismiss[162](index=162&type=chunk) - The company is also facing two shareholder derivative lawsuits, *O'Halloran v. Barrett, et al.* and *Da Silva v. Barrett, et al.*, which have been consolidated and stayed pending the outcome of the motion to dismiss in the class action[163](index=163&type=chunk)[164](index=164&type=chunk) - The company intends to defend itself vigorously and does not currently believe any existing litigation will have a material adverse effect on its business, results of operations, cash flows, or financial condition[162](index=162&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section highlights fraud risks associated with travel payments, particularly from stolen credit cards and the use of AI - The company faces fraud risk related to travel payments, including accepting fraudulent bookings made with stolen credit cards, which can lead to reversed payments (chargebacks)[167](index=167&type=chunk) - The company's ability to detect and combat fraud may be negatively impacted by new technology platforms and global expansion, and failure to widely adopt protective measures like multi-factor authentication could lead to a significant increase in fraudulent activity[167](index=167&type=chunk) - The rapid development and adoption of AI technology also increase the risk of fraudulent bookings, which could have a material adverse effect on the company's business, results of operations, and financial condition[169](index=169&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section discloses that the company made no Class A common stock repurchases in Q1 2025 but has approved a new $50 million stock repurchase program Share Repurchases | Period | Total Number of Shares Repurchased | Weighted-Average Price Paid per Share | Total Number of Shares Repurchased as Part of Publicly Announced Plans | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans | | :--------------- | :----------- | :--------------- | :----------------------- | :--------------------------------------- | | Jan 1-31, 2025 | — | — | — | 39,490,003 | | Feb 1-28, 2025 | — | — | — | 50,000,000 | | Mar 1-31, 2025 | — | — | — | 50,000,000 | | **Total** | **—** | **—** | **—** | | - The company did not repurchase any shares of Class A common stock in Q1 2025; as of March 31, 2025, **$50.0 million** remained available under the 2025 Stock Repurchase Program[171](index=171&type=chunk) [Item 3. Defaults Upon Senior Securities](index=43&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that the company had no defaults upon senior securities during the reporting period - No defaults upon senior securities[172](index=172&type=chunk) [Item 4. Mine Safety Disclosures](index=43&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that the company has no mine safety information to disclose - No mine safety disclosures[173](index=173&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) This section discloses insider trading arrangements for company executives, including the termination and adoption of Rule 10b5-1 trading plans Insider Trading Arrangements | Reporting Person | Action | Date | Rule 10b5-1 | Non-Rule 10b5-1 | Total Shares to be Sold | Expiration Date | | :--------------- | :----- | :---------- | :---------- | :------------ | :----------- | :----------- | | Ryan Schaffer, CFO | Terminated | Mar 27, 2025 | X | | 200,000 | Dec 31, 2025 | | Ryan Schaffer, CFO | Adopted | Mar 27, 2025 | X | | 200,000 | Dec 31, 2025 | | David Barrett, CEO | Adopted | Mar 31, 2025 | X | | 360,000 | Jun 30, 2026 | - CFO Ryan Schaffer terminated and adopted a new Rule 10b5-1 trading plan on March 27, 2025, to sell **200,000 shares**, effective until December 31, 2025[174](index=174&type=chunk)[175](index=175&type=chunk) - CEO David Barrett adopted a new Rule 10b5-1 trading plan on March 31, 2025, to sell **360,000 shares**, effective until June 30, 2026[174](index=174&type=chunk)[176](index=176&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed or incorporated by reference with this quarterly report - Exhibits include the company's amended and restated certificate of incorporation and bylaws, the third amendment to the loan and security agreement dated February 13, 2025, and CEO and CFO certifications under Sections 302 and 906[178](index=178&type=chunk) - This report also contains the Inline XBRL Instance Document, Taxonomy Extension Schema Document, Calculation Linkbase Document, Definition Linkbase Document, Presentation Linkbase Document, and the cover page interactive data file[178](index=178&type=chunk) [Signatures](index=46&type=section&id=Signatures) This section contains the authorized signatures for Expensify, Inc., signed on May 8, 2025 - This report was signed on May 8, 2025, by David Barrett, President and Chief Executive Officer, and Ryan Schaffer, Chief Financial Officer of Expensify, Inc[182](index=182&type=chunk)

Q1'25 was another strong quarter. Though seasonally affected as expected, on an annual basis this quarter saw an 8% increase in revenue, 43% increase in interchange, 38% increase in cash from operating activities and 75% increase in free cash flow from the same quarter last year. In fact, this quarter produced $4.8 million of cash from operating activities and $9.1 million in FCF – over 50% of the bottom end of our FCF forecast for the entire year. As such we are increasing our full year 2025 FCF guidance t ...

Financial Data and Key Metrics Changes - Revenue for Q4 2024 was $37 million, representing a 5% increase both quarter-over-quarter and year-over-year [12][94] - Average paid members increased slightly to 687,000, showing a positive trend compared to the previous quarter [12][94] - Interchange revenue reached $5.1 million, a significant 62% increase year-over-year [12][94] - Operating cash flow was $7.4 million, while free cash flow was $6.3 million, marking a 272% increase year-over-year for Q4 [12][15][94] - For fiscal year 2024, total revenue was $139.2 million, with a net loss of $10.1 million and non-GAAP net income of $23.5 million [14][96] Business Line Data and Key Metrics Changes - The Expensify card saw a quarter-over-quarter growth of 11% to $5.1 million, with interchange growing 54% year-over-year to $17.2 million [19][100] - The company successfully migrated its card program, simplifying its accounting processes [20][100] - The launch of Expensify Travel introduced new fee-based and transactional revenue opportunities, generating high customer enthusiasm [22][103] Market Data and Key Metrics Changes - In January, the number of paid members was 665,000, which is lower than Q4 but consistent with seasonal trends observed in previous years [21][102] - The company noted significant seasonality in Q1, which is expected and aligns with historical data [21][102] Company Strategy and Development Direction - The company continues to focus on a scalable acquisition model through viral lead generation and bottom-up adoption strategies [25][106] - AI integration is a key focus, with the introduction of chat-based functionalities aimed at enhancing user experience and operational efficiency [26][108] - The company aims to position itself as a leader in fintech AI, leveraging its unique data assets to drive innovation [37][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving profitability soon, with a net loss of $1.3 million in Q4 [13][94] - The initial guidance for 2025 is set at $16 million to $20 million in free cash flow, reflecting a conservative approach due to uncertainties in the macroeconomic environment [18][99] - Management highlighted the importance of AI in driving efficiency improvements and enhancing customer engagement [17][26] Other Important Information - The company has successfully reduced its debt by $22.7 million and is now debt-free, which is a significant milestone [22][104] - The company is committed to continuous improvement in its AI capabilities, with ongoing developments in SmartScan and concierge functionalities [41][70] Q&A Session Summary Question: Understanding AI capabilities and integration with third-party systems - Management confirmed that existing AI capabilities, such as concierge and SmartScan, are operational, while more advanced features are under development [67][70] - Integration with third-party systems like Slack is possible, but the core functionalities are best utilized within the Expensify app [72][74] Question: Driving broader adoption of chat functionalities - Management noted that customer migration to the new system has been sticky, with users generally satisfied with the experience [78][80] - The chat-centric features are designed to proactively engage users, demonstrating value and encouraging adoption [81][82] Question: Adoption and revenue potential of Expensify Travel - Initial enthusiasm for Expensify Travel has been high, with significant month-over-month increases in travel bookings [84][86] - Management anticipates that, similar to the Expensify card, travel services will grow and contribute meaningfully to revenue over time [86][88]

Financial Data and Key Metrics Changes - Revenue for Q4 2024 was $37 million, representing a 5% increase both quarter-over-quarter and year-over-year [11][12] - Average paid members increased slightly to 687,000, while interchange revenue reached $5.1 million, a 62% increase year-over-year [12][11] - Operating cash flow was $7.4 million, and free cash flow was $6.3 million, with a net loss of $1.3 million [12][14] - For fiscal year 2024, total revenue was $139.2 million, with a net loss of $10.1 million and non-GAAP net income of $23.5 million [14][15] - Free cash flow for fiscal year 2024 was $23.9 million, a 4,200% increase year-on-year [14][15] Business Line Data and Key Metrics Changes - The Expensify card grew 11% quarter-on-quarter to $5.1 million, with interchange growing 54% year-on-year to $17.2 million [18][19] - The company successfully completed the migration of its card program, simplifying its accounting structure [19][20] - The launch of Expensify Travel is expected to add fee-based and transactional revenue opportunities, with high customer enthusiasm noted [21][22] Market Data and Key Metrics Changes - In January, the number of paid members was 665,000, which is lower than Q4 but consistent with seasonal trends [20][21] - The company noted significant seasonality in Q1, which is expected [20] Company Strategy and Development Direction - The company continues to focus on bottom-up adoption and the payment super app strategy, which remains a sound approach [24][25] - AI integration is a significant focus, with the introduction of chat-based functionalities aimed at enhancing user experience and operational efficiency [25][26] - The company aims to leverage its unique data access for AI training, enhancing its competitive edge in expense management [39][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving profitability soon, with a focus on improving operational efficiency through AI [12][15] - The initial guidance for 2025 is set at $16 million to $20 million in free cash flow, reflecting a conservative approach due to macroeconomic uncertainties [17][18] - The company is excited about the potential of its AI-driven features, which are expected to enhance user engagement and operational efficiency [25][26] Other Important Information - The company has reduced its debt by $22.7 million and is now debt-free, which is a significant achievement [22][23] - The company is committed to continuous improvement and innovation, with a focus on AI and automation to enhance its service offerings [48][49] Q&A Session Summary Question: Understanding AI capabilities and integration with third-party systems - Management confirmed that existing AI capabilities like concierge and SmartScan are operational, while more advanced features are under development [68][69] - Integration with third-party systems like Slack is possible, but the core functionalities are best utilized within the Expensify app [72][73] Question: Driving broader adoption of the chat functionality - Management noted that customer migration to the new system has been sticky, with users generally satisfied with the experience [77][78] - The chat-centric features are expected to demonstrate value and encourage broader adoption through proactive engagement [80][81] Question: Adoption and future outlook for Expensify Travel - Initial enthusiasm for Expensify Travel has been high, with account managers reporting significant interest following the launch [84][85] - The company anticipates that, similar to the Expensify card, travel services will grow and contribute meaningfully to revenue over time [86]

Revenue Growth and Customer Retention - The ability to convert free users and trial subscriptions into paying customers is essential for revenue growth[102]. - Retaining existing customers and expanding usage within organizations are key factors for maintaining gross logo retention and net seat retention rates[96]. - The success of new features and enhancements is vital for attracting new customers and increasing revenue from existing customers[108]. - The company must ensure effective pricing strategies to attract new customers and retain existing ones[107]. - The company is focused on expanding its member and customer base in new markets while ensuring compliance with local regulations[96]. Competition and Market Risks - The company faces risks from competition, pricing pressures, and the need to adapt to rapidly changing technology and customer preferences[100]. - The company faces significant competition from traditional expense management solutions and newer entrants, which may impact customer acquisition and retention rates[112]. - Increased competition from larger firms with more resources could hinder the company's ability to maintain market share and pricing power[113]. - An economic downturn could lead to declines in business spending and a reduction in the number of paid monthly members, adversely affecting revenue[116]. Compliance and Regulatory Challenges - Regulatory compliance is critical, with the company subject to various laws and regulations that could impose significant costs and operational changes[117]. - The company is in the process of obtaining additional money transmission licenses, which involves ongoing compliance obligations and potential regulatory scrutiny[120]. - The company is subject to anti-corruption and anti-money laundering laws, which could expose it to criminal and civil liabilities if not complied with[180]. - The company’s wholly owned subsidiary, Expensify Payments LLC, is registered as a "Money Services Business" and must comply with the Bank Secrecy Act, which imposes significant operational requirements[182]. - The California Consumer Privacy Act (CCPA) imposes new operational requirements and potential liabilities for the company, particularly in the event of a data breach[187]. Financial Performance and Capital Structure - The company has authorized a share repurchase program of up to $50 million for its Class A common stock, which may increase stock price volatility[126]. - The company expects to be in compliance with all debt covenants by the end of the fiscal quarter ended March 31, 2025[249]. - The company is currently experiencing a high interest rate environment, which could adversely impact its financial condition due to variable-rate debt[250]. - The company may need additional capital in the future, and there is no assurance that financing will be available on favorable terms[244]. - The company does not intend to pay cash dividends in the foreseeable future, relying instead on stock price appreciation for investor returns[284]. Technology and Innovation - The company uses third-party artificial intelligence technologies to optimize internal processes and is making significant investments in this area[146]. - The company anticipates increased investment in AI technologies to enhance products and services, with no assurance of guaranteed benefits to efficiency or profitability[148]. - The company relies on third-party data centers and technologies, and any disruptions could adversely affect operations and customer relationships[205]. - The platform's performance may degrade due to increasing customer numbers and bandwidth requirements, potentially leading to customer loss[203]. Intellectual Property and Legal Risks - The company faces risks from third-party intellectual property claims, which could lead to significant legal expenses and operational disruptions[220]. - The ability to develop and commercialize solutions without infringing on third-party intellectual property rights is crucial for the company's success[221]. - The company may incur substantial costs and resource diversion due to litigation related to intellectual property rights enforcement[227]. - The reliance on unpatented proprietary technology poses risks, as unauthorized parties may attempt to copy or misuse the company's technology[230]. Customer Experience and Support - The ability to provide excellent customer experience and support is crucial for maintaining customer trust and loyalty[96]. - The company faces challenges in maintaining high-quality customer experience, which is critical for converting trial users into paying customers and sustaining its reputation[160]. - The company relies on a global network of specialized contractors for customer support, and any inability to attract sufficient personnel could harm its operations and financial condition[163]. International Operations and Market Dynamics - Revenue from international customers was $12.4 million (9% of total revenue) for the year ended December 31, 2024, compared to $13.3 million in 2023 and $14.7 million in 2022, indicating a decline in international revenue[173]. - The company faces significant risks in international operations, including the need for localization, compliance with varying data privacy laws, and potential political and economic instability[174][176]. - The company is exposed to foreign currency exchange rate fluctuations, which can adversely affect revenue and operational results[179]. Governance and Shareholder Considerations - The company qualifies as a "controlled company" under Nasdaq standards, which allows it to rely on exemptions from certain corporate governance requirements[273]. - The company’s governance structure allows the Voting Trust to control significant corporate decisions, which may not align with the interests of public stockholders[267]. - Anti-takeover provisions in the company's governance documents could impair takeover attempts and affect the market price of Class A common stock[287].

Financial Performance - Q4 revenue increased by 5% quarter-over-quarter, with FY24 net loss down 76% year-over-year[3]. - FY24 adjusted EBITDA reached $39.4 million, up 199% year-over-year[3]. - Revenue for Q4 2024 was $37,004,000, a 5.1% increase from $35,208,000 in Q4 2023[29]. - Total revenue for the year ended December 31, 2024, was $139,236,000, down 7.6% from $150,687,000 in 2023[29]. - The net loss for the year ended December 31, 2024, was $10,055 thousand, a significant improvement from a net loss of $41,456 thousand in 2023, representing a reduction of approximately 76.8%[31]. - Non-GAAP net income for FY24 was $23.5 million, compared to a net loss of $10.1 million[8]. - Adjusted EBITDA for the year ended December 31, 2024, was $39,372 thousand, compared to $13,174 thousand in 2023, indicating an increase of approximately 198.5%[32]. - The net loss margin for the year ended December 31, 2024, improved to 7% from 28% in 2023[33]. Cash Flow and Liquidity - Operating cash flow and free cash flow for FY24 were both $23.9 million, exceeding the high end of the forecast by 19%[3]. - The net cash provided by operating activities for the year ended December 31, 2024, was $23,877 thousand, a substantial increase from $1,559 thousand in 2023[31]. - Free cash flow for the year ended December 31, 2024, was $23,863 thousand, compared to $555 thousand in 2023, reflecting a notable increase[34]. - Free cash flow guidance for FY25 is estimated between $16.0 million and $20.0 million[11]. - Cash and cash equivalents rose to $48,772,000 as of December 31, 2024, compared to $47,510,000 in 2023[27]. - The cash and cash equivalents and restricted cash at the end of the period were $90,834 thousand, down from $96,658 thousand at the end of 2023[31]. Expenses and Liabilities - Operating expenses for Q4 2024 totaled $18,391,000, a decrease of 25.5% compared to $24,686,000 in Q4 2023[29]. - Research and development expenses for the year ended December 31, 2024, were $24,638,000, up from $23,368,000 in 2023[29]. - Total stock-based compensation expense for the year ended December 31, 2024, was $33,537,000, down from $41,212,000 in 2023[29]. - The company reported a total current liabilities reduction from $67,892,000 in 2023 to $38,010,000 in 2024[27]. - The company reduced its debt by $22.7 million in 2024, achieving a debt-free status[3][15]. Membership and Revenue Streams - Paid members decreased by 4% year-over-year to 687,000, but showed a slight increase from Q3 2024[15]. - Expensify Card spend grew by 44% year-over-year, with interchange revenue increasing by 54% year-over-year to $17.2 million[3][8]. - The company launched a travel product, adding new revenue opportunities[15]. Operational Efficiency - AI-driven support expanded to provide 80% of tier 1 support, significantly reducing human escalations[15]. - Gross margin for Q4 2024 was $18,856,000, slightly up from $18,700,000 in Q4 2023[29]. - The adjusted operating cash flow margin for the year ended December 31, 2024, was 17%, up from 1% in 2023[34].

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Financial Data and Key Metrics Changes - Total revenue for Q3 2024 was $35.4 million, representing a 6.3% increase quarter-over-quarter but a 3% decrease year-over-year, indicating ongoing challenges in the business [7] - Average paid members remained flat at 684,000 quarter-over-quarter, reflecting a 5% decrease compared to the same period last year [8] - Free cash flow for Q3 was $6.7 million, with operating cash flow at $3.7 million and a net loss of $2.2 million; non-GAAP net income was $5.4 million, and adjusted EBITDA was $9.7 million [9] - Free cash flow guidance for the year was increased to $19 million to $20 million, up from previous guidance of $15 million to $16 million [11] Business Line Data and Key Metrics Changes - Interchange revenue from the Expensify Card was $4.6 million, a significant 48% increase year-over-year, driven by the successful launch of the new card program [8][13] - 94% of existing card spend has been migrated to the new program, which is expected to further enhance revenue growth [14][15] Market Data and Key Metrics Changes - Paid active users in October increased to 693,000, a 1% improvement from Q3 [16] Company Strategy and Development Direction - The company is focusing on stabilizing the business and improving core fundamentals while laying a stronger foundation for future growth [6] - The new Expensify platform aims to automate the remaining 20% of expense management processes, enhancing efficiency and user experience through a chat-centric design [21][24] - Expensify Travel is in the market and generating revenue, with expectations for significant growth as it becomes a standard offering in expense management [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about near-term momentum and the potential for revenue growth from the new Expensify platform [7] - The company is seeing a rebound in existing customer usage expansion, which is expected to contribute positively to future growth [35] Other Important Information - The company has not implemented any workforce reductions; instead, it is focusing on operational efficiencies to improve cash flow margins [47] Q&A Session Summary Question: What is the revenue contribution from Expensify Travel today? - Management believes Expensify Travel has significant potential as it becomes a standard requirement for expense management, but specific revenue figures are not yet available [28] Question: How does the company plan to manage share buybacks going forward? - Management is opportunistic regarding share buybacks and is exploring various options for deploying cash reserves [29][30] Question: What is driving the increase in paid members? - The increase is attributed to the ramp-up of the new Expensify platform and a rebound in existing customer usage expansion [34] Question: How is the go-to-market strategy evolving? - The company continues to focus on organic channels and improving conversion rates, with positive early results from the new platform [38][40] Question: Is there any interchange revenue from travel offerings? - Management indicated that the connection between travel product usage and interchange revenue is not significant at this time [43][45] Question: Were there any cost-cutting measures that led to increased free cash flow? - The increase in free cash flow is primarily due to operational efficiencies rather than workforce reductions [47]

Financial Performance - For the quarter ended September 30, 2024, revenue was $35.4 million, a decrease of 3% from $36.5 million in the same period in 2023 [112]. - Revenue decreased by $13.2 million, or 11%, for the nine months ended September 30, 2024 compared to the same period in 2023 [120]. - Adjusted EBITDA for the three months ended September 30, 2024 was $9.676 million, compared to a loss of $3.549 million in the same period of 2023, indicating a significant improvement [133]. - The adjusted EBITDA margin improved to 27% for the three months ended September 30, 2024, compared to a margin of (10)% in the same period of 2023 [133]. - Non-GAAP net income for the three months ended September 30, 2024 was $5.432 million, a recovery from a loss of $6.736 million in the same period of 2023 [135]. - The non-GAAP net income margin was 15% for the three months ended September 30, 2024, compared to (18)% in the same period of 2023 [135]. - Net loss for the three months ended September 30, 2024, was $2.2 million, compared to a net loss of $17.0 million in the same period in 2023 [110]. Operating Expenses - Total operating expenses for the three months ended September 30, 2024, were $18.0 million, down from $33.7 million in the same period in 2023 [110]. - Research and development expenses for the three months ended September 30, 2024, were $5.6 million, down from $6.6 million in the same period in 2023 [110]. - General and administrative expenses decreased significantly to $9.1 million for the three months ended September 30, 2024, from $14.2 million in the same period in 2023 [110]. - Sales and marketing expenses for the three months ended September 30, 2024, were $3.3 million, a decrease from $12.9 million in the same period in 2023 [110]. - Research and development expenses decreased by $1.0 million, or 15%, for the three months ended September 30, 2024 compared to the same period in 2023 [115]. - General and administrative expenses decreased by $5.2 million, or 36%, for the three months ended September 30, 2024 compared to the same period in 2023 [116]. - Sales and marketing expenses decreased by $9.6 million, or 75%, for the three months ended September 30, 2024 compared to the same period in 2023 [117]. Cash Flow and Liquidity - Net cash provided by operating activities increased to $16.475 million for the nine months ended September 30, 2024, up from $2.102 million in the same period of 2023 [141]. - The company had $39.2 million in cash and cash equivalents as of September 30, 2024, with no outstanding indebtedness and $24.0 million available for additional borrowings [139]. - Net cash used in investing activities was $6.699 million for the nine months ended September 30, 2024, primarily due to software development costs [143]. - Net cash used in financing activities was $21.180 million for the nine months ended September 30, 2024, mainly for repayment of the revolving line of credit and common stock repurchases [144]. - The company believes its existing cash resources will be sufficient to finance operations and growth strategy for the next 12 months [140]. Membership and Transactions - As of September 30, 2024, Expensify has processed 1.7 billion expense transactions and has over 15 million members [93]. - The average number of paid members decreased from 719,000 in September 30, 2023 to 684,000 in September 30, 2024, representing a decline of approximately 4.9% [131]. Other Financial Metrics - Interchange revenue for the three months ended September 30, 2024, was $3.7 million, compared to $4.2 million for the nine months ended September 30, 2024 [99]. - Cost of revenue, net decreased by $0.5 million, or 3%, for the three months ended September 30, 2024 compared to the same period in 2023 [113]. - Gross margin remained consistent at 52% for both the three months ended September 30, 2024 and 2023 [114]. - Gross margin decreased to 55% for the nine months ended September 30, 2024 compared to 56% in the same period in 2023 [122]. - Other income (expenses), net decreased by $4.1 million, or 80%, for the nine months ended September 30, 2024 compared to the same period in 2023 [125]. - Provision for income taxes was $6.4 million during the nine months ended September 30, 2024 compared to $1.9 million for the same period in 2023 [127]. Compliance and Governance - As of September 30, 2024, the company was in compliance with all debt covenants [154]. - The total liquidity ratio must be maintained at not less than 1.10 to 1.00 from the quarter ending March 31, 2024, and not less than 1.20 to 1.00 from the quarter ending June 30, 2024 [152]. - The total EBITDA net leverage ratio must be maintained at not less than 2.50 to 1.00 from the quarter ended March 31, 2025 [152]. - There have been no material changes in contractual obligations and commitments as of September 30, 2024 [155]. - The company has not engaged in any off-balance sheet financing arrangements during the periods presented [157]. - There have been no material changes to critical accounting policies and estimates compared to the 2023 Annual Report [159]. - No indemnification demands have been made that could materially affect the company's financial statements [156]. - The company has entered into a Second Amendment to the 2024 Amended Loan and Security Agreement, allowing certain subsidiaries to remain excluded under specific conditions [153]. - There have been no material changes in market risk disclosures compared to the 2023 Annual Report [161]. - Recent accounting pronouncements not yet adopted are detailed in the Quarterly Report on Form 10-Q [160]. Transition and Future Outlook - The transition from the Legacy Card Program to the Updated Card Program is expected to be fully completed by December 31, 2024 [95]. - The company expects to continue investing in product and service offerings to enhance customer experience and attract new customers [104].