Expensify(EXFY) - 2025 Q1 - Quarterly Report

Special Note Regarding Forward-Looking Statements 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] - 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][12] - 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] Part I - Financial Information 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 This section contains Expensify, Inc's unaudited condensed consolidated financial statements as of March 31, 2025 Condensed Consolidated Balance Sheets 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 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 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 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 NOTE 1 – GENERAL INFORMATION - 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] - 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] - 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] - 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] NOTE 2 - REVENUE AND CERTAIN STATEMENT OF OPERATIONS COMPONENTS 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] - 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] - 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] NOTE 3 - CERTAIN BALANCE SHEET COMPONENTS 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] 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 - 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] - 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][54] - As of March 31, 2025, there were no borrowings under the revolving credit facility, with $24.0 million remaining available for additional borrowing[59] - 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] NOTE 5 - STOCK INCENTIVE PLANS - 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][63][64] - 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] 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 - 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] - 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] - 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] NOTE 7 - NET LOSS PER SHARE 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] 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 - 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] - 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] - The company did not repurchase any shares of Class A common stock under its stock repurchase programs during Q1 2025 or Q1 2024[93] NOTE 9 - RELATED PARTY TRANSACTIONS - As of March 31, 2025, the company had no material related party transactions[94] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses Expensify's financial condition and results of operations for the three months ended March 31, 2025 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] - 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] MACROECONOMIC TRENDS - 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] - 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] Components of Results of Operations 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] - 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][102] - 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] Cost of Revenue, Net - 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] - 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] Operating Expenses Research and Development - 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] - 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] General and Administrative - 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] Sales and Marketing - 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] - 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] Other Income (Expenses), Net - 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] Provision for Income Taxes - 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] Results of Operations Revenue 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] - 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] Cost of Revenue, Net and Gross Margin 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] - 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] Operating Expenses Research and Development 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] General and Administrative 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] Sales and Marketing 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] Other income (expenses), net 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] Provision for Income Taxes 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][122] Liquidity and Capital Resources CASH FLOWS 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 - 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] CASH FLOWS FROM INVESTING ACTIVITIES - 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] CASH FLOWS FROM FINANCING ACTIVITIES - 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] SHARE REPURCHASE PROGRAM - 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] - 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] CREDIT FACILITIES - The company fully repaid its $8.3 million amortizing term mortgage loan on August 29, 2024, and terminated the related agreement with CIBC[131] - 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][133] - As of March 31, 2025, there were no borrowings under the revolving credit facility, with $24.0 million remaining available for additional borrowing[59] Certain Covenants - 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] - The company must maintain specific financial covenants, including a Total EBITDA Net Leverage Ratio not to exceed 2.50 to 1.00[138] - As of March 31, 2025, the company was in compliance with all debt covenants[139] Key Business Metrics and Non-GAAP Financial Measures KEY BUSINESS METRICS Paid Members - 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] Paid Members (in thousands) | Quarter Ended | Paid Members | | :--------- | :-------------- | | Mar 31, 2025 | 657 | | Mar 31, 2024 | 688 | NON-GAAP FINANCIAL MEASURES Limitations of Non-GAAP Financial Measures - 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] Adjusted EBITDA and Adjusted EBITDA Margin - 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] 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 - Non-GAAP net income is defined as net loss, excluding stock-based compensation expense[146] 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 - 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] 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 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 - 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] Indemnification Agreements - 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] - 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] Off-Balance Sheet Arrangements - 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] Critical Accounting Policies and Estimates - 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] - There have been no material changes to the critical accounting policies and estimates from those disclosed in the 2024 Annual Report[156] Recent Accounting Pronouncements - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - 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][161] Part II - Other Information This part covers legal proceedings, risk factors, and other required disclosures Item 1. Legal Proceedings 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] - 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][164] - 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][164][165] Item 1A. Risk Factors 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] - 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] - 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities This section states that the company had no defaults upon senior securities during the reporting period - No defaults upon senior securities[172] Item 4. Mine Safety Disclosures This section states that the company has no mine safety information to disclose - No mine safety disclosures[173] Item 5. Other Information 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][175] - 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][176] Item 6. Exhibits 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] - 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] 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]