Expensify(EXFY) - 2025 Q2 - Quarterly Report

Special Note Regarding Forward-Looking Statements This section outlines that the report contains forward-looking statements subject to substantial risks and uncertainties, which the company does not commit to updating unless legally required Forward-Looking Statements Overview The report contains forward-looking statements subject to substantial risks and uncertainties, which the company does not commit to updating unless legally required - Forward-looking statements are subject to substantial risks and uncertainties, including financial performance, market competition, operating expenses, liquidity, geopolitical tensions, inflation, and AI impact[10][11][14] - The company does not commit to updating forward-looking statements unless legally required[12] Part I - Financial Information This part presents the company's condensed consolidated financial statements, management's discussion and analysis, and disclosures on market risk and controls Item 1. Condensed Consolidated Financial Statements This section presents Expensify's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows Condensed Consolidated Balance Sheets Total assets increased to $187.14 million, liabilities to $55.32 million, and stockholders' equity to $131.82 million as of June 30, 2025 Balance Sheet Summary | Metric | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :---------------------------------- | :----------------------------------- | :-------------------- | :--------- | | Total Assets | $187,138 | $173,680 | $13,458 | 7.75% | | Total Liabilities | $55,323 | $45,437 | $9,886 | 21.76% | | Total Stockholders' Equity | $131,815 | $128,243 | $3,572 | 2.79% | - Cash and cash equivalents increased by $11.75 million (24.1%) from $48.77 million to $60.52 million[19] - Settlement assets, net, increased by $10.31 million (24.3%) from $42.41 million to $52.72 million[19] Condensed Consolidated Statements of Operations Net loss significantly increased to $8.79 million (3 months) and $11.96 million (6 months) despite revenue growth, driven by higher sales and marketing expenses Three Months Ended June 30 | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (in thousands) | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :-------------------- | :--------- | | Revenue | $35,764 | $33,288 | $2,476 | 7.44% | | Gross margin | $18,577 | $18,925 | $(348) | -1.84% | | Net loss | $(8,788) | $(2,764) | $(6,024) | 217.94% | | Basic and diluted EPS | $(0.10) | $(0.03) | $(0.07) | 233.33% | Six Months Ended June 30 | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (in thousands) | % Change | | :-------------------- | :----------------------------- | :----------------------------- | :-------------------- | :--------- | | Revenue | $71,838 | $66,823 | $5,015 | 7.50% | | Gross margin | $36,819 | $37,876 | $(1,057) | -2.79% | | Net loss | $(11,957) | $(6,545) | $(5,412) | 82.69% | | Basic and diluted EPS | $(0.13) | $(0.08) | $(0.05) | 62.50% | - Sales and marketing expenses significantly increased by $11.27 million (367%) for the three months ended June 30, 2025, and by $11.43 million (177%) for the six months ended June 30, 2025, primarily due to advertising for F1® The Movie sponsorship[21][132][141] Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $131.82 million, influenced by $15.69 million in stock-based compensation and a $11.96 million net loss Stockholders' Equity Activities | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Stock-based compensation | $15,692 | $17,466 |\n| Issuance of common stock under Matching Plan | $2,610 | $2,004 |\n| Repurchase and retirement of common stock | $(3,026) | $0 |\n| Net loss | $(11,957) | $(6,545) | - Total stockholders' equity increased by $3.57 million from December 31, 2024, to June 30, 2025[27] Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $13.72 million, investing cash flow decreased to $1.67 million, and financing cash flow was $(0.46) million for the six months ended June 30, 2025 Cash Flow Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :--------- | | Net cash provided by operating activities | $13,721 | $12,788 | $933 | 7.30% | | Net cash used in investing activities | $(1,672) | $(4,867) | $3,195 | -65.65% | | Net cash (used in) provided by financing activities | $(455) | $1,816 | $(2,271) | -125.06% | | Net increase in cash and cash equivalents and restricted cash | $11,594 | $9,737 | $1,857 | 19.07% | - Operating cash flow increase was primarily due to higher interchange revenue and decreased SmartScan costs, partially offset by lower subscription revenue and increased marketing spend[148] - Investing cash flow decrease was mainly due to lower employee and external contributor software development costs[149] Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations for the condensed consolidated financial statements, covering various financial components and policies NOTE 1 – GENERAL INFORMATION Expensify provides a cloud-based expense management platform and card services, operating as a single reportable segment under GAAP and SEC rules - Expensify offers a comprehensive expense management platform and the Expensify Card, simplifying expense and bill management for employees and vendors[34][35] - The Updated Card Program, launched in February 2024, operates under an agreement with The Bancorp Bank, N.A[36] - The company operates as one reportable segment, with the CODM reviewing financial information on a consolidated basis[43] NOTE 2 - REVENUE AND CERTAIN STATEMENT OF OPERATIONS COMPONENTS Revenue increased by 7-8%, driven by significant interchange revenue from the Updated Card Program, offsetting decreased Legacy Card Program consideration Revenue by Source and Location | Revenue Source (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $35,764 | $33,288 | $71,838 | $66,823 | | United States Revenue | $32,609 | $30,179 | $65,683 | $60,692 | | All other locations Revenue | $3,155 | $3,109 | $6,155 | $6,131 | | Cashback Rewards (contra revenue) | $2,500 | $2,000 | $4,800 | $4,000 | | Interchange Revenue | $5,300 | $500 | $10,300 | $500 | - Interchange revenue from the Updated Card Program significantly increased to $5.3 million (3 months) and $10.3 million (6 months) in 2025, up from $0.5 million in 2024 for both periods[50] - Consideration from vendor under the Legacy Card Program, net of fees, was immaterial for 2025, down from $3.1 million (3 months) and $6.3 million (6 months) in 2024, indicating a shift to the Updated Card Program[52] NOTE 3 - CERTAIN BALANCE SHEET COMPONENTS Other current assets increased to $24.28 million, while capitalized software, net, decreased to $14.87 million due to amortization Other Current Assets | Other Current Assets (in thousands) | As of June 30, 2025 | As of December 31, 2024 | | :---------------------------------- | :------------------ | :---------------------- | | Expensify Card posted collateral | $13,280 | $12,415 | | Expensify.org restricted cash | $6,030 | $5,972 | | Income tax receivable | $2,573 | $429 | | Earned interchange restricted cash | $1,651 | $1,442 | | Total Other Current Assets | $24,277 | $20,908 | Capitalized Software, Net | Capitalized Software, Net (in thousands) | As of June 30, 2025 | As of December 31, 2024 | | :--------------------------------------- | :------------------ | :---------------------- | | Capitalized software development costs | $33,630 | $32,332 | | Less: accumulated amortization | $(18,764) | $(16,100) |\n| Capitalized software, net | $14,866 | $16,232 | - Amortization expense for capitalized software development costs was $3.7 million for the six months ended June 30, 2025, up from $2.5 million in the prior year[54] NOTE 4 - COMMITMENTS AND CONTINGENCIES The company repaid its mortgage, terminated its revolving credit facility, and maintains a $7.5 million letter of credit, with no material legal contingencies - The $8.3 million amortizing term mortgage was fully repaid in August 2024[59][152] - The $25.0 million revolving credit facility was terminated on July 1, 2025, with no outstanding borrowings[68][159] - A $7.5 million irrevocable standby Letter of Credit, increased from $1.0 million in April 2025, remains outstanding and is secured with cash collateral[61][68][154][159] NOTE 5 - STOCK INCENTIVE PLANS As of June 30, 2025, 24.29 million shares were available under 2021 Incentive Plans, with stock-based compensation expense totaling $14.92 million for the six months - As of June 30, 2025, 24,293,896 shares of Class A common stock were reserved and available for issuance under the 2021 Incentive Plans[75] Stock-Based Compensation Expense | Stock-Based Compensation (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Matching Plan shares | $973 | $1,141 | $2,500 | $2,570 | | Equity-classified restricted stock units | $5,937 | $7,029 | $12,013 | $13,290 | | Settlement of liability-classified restricted stock units | $344 | $0 | $344 | $0 | | Stock options | $209 | $857 | $835 | $1,606 | | Total stock-based compensation | $7,463 | $9,027 | $15,692 | $17,466 | | Less: capitalized as software development costs | $(536) | $(646) | $(775) | $(1,561) | | Total stock-based compensation expense | $6,927 | $8,381 | $14,917 | $15,905 | - Unamortized stock-based compensation expense for unvested equity-classified RSUs was $86.3 million, expected to be recognized over 4.02 years[84] NOTE 6 - INCOME TAXES The company recorded a $0.7 million tax benefit (3 months) and $1.3 million tax provision (6 months) in 2025, with the IRS concluding its 2021 examination without adjustments Income Tax Summary | Income Tax (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Benefit from (provision for) income taxes | $661 | $(2,723) | $(1,345) | $(3,757) | | Effective tax rate | 7.0% | (6,641.5)% | (12.7)% | (134.8)% | - The IRS examination of the 2021 federal tax return concluded with no proposed adjustments[97] - New tax legislation (H.R.1) enacted July 4, 2025, modifying corporate income tax code, is being evaluated for potential impacts on financial statements[98][125] NOTE 7 - NET LOSS PER SHARE Basic and diluted net loss per share was $(0.10) (3 months) and $(0.13) (6 months) in 2025, with potentially dilutive shares excluded due to net loss Net Loss Per Share | Net Loss Per Share | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic and Diluted | $(0.10) | $(0.03) | $(0.13) | $(0.08) | - Weighted average shares of common stock used to compute net loss per share increased to 92.27 million (3 months) and 91.89 million (6 months) in 2025, from 86.59 million and 85.87 million in 2024, respectively[99][101] - Potentially dilutive shares (stock options, Matching Plan shares) were excluded from diluted EPS calculations as their effect would have been anti-dilutive due to the net loss[104] NOTE 8 - EQUITY A new $50.0 million share repurchase program was approved in February 2025, with $3.0 million in repurchases during the quarter, leaving $47.0 million remaining - A new $50.0 million 2025 Share Repurchase Program was approved in February 2025, replacing the 2022 program[106][151] Share Repurchase Activity | Period | Total Shares Purchased | Weighted Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Programs | Maximum Dollar Value Remaining Under Program (in thousands) | | :----- | :--------------------- | :------------------------------------ | :------------------------------------------------------ | :---------------------------------------------------------- | | May 1 - 31, 2025 | 478,307 | $2.32 | 478,307 | $48,890 | | June 1 - 30, 2025 | 807,029 | $2.34 | 807,029 | $47,000 | | Total (3 months) | 1,285,336 | $2.33 | 1,285,336 | $47,000 | - No shares were repurchased under the 2022 Share Repurchase Program during the three and six months ended June 30, 2024[107] NOTE 9 - RELATED PARTY TRANSACTIONS No significant related party transactions were reported as of June 30, 2025 - No significant related party transactions were reported as of June 30, 2025[108] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, liquidity, and capital resources, including key business metrics OVERVIEW Expensify, a cloud-based expense management platform, processed 1.8 billion transactions and served 652,000 paid members across 42,800 companies as of June 30, 2025 - Expensify is a cloud-based expense management software platform, founded in 2008, with over 15 million members[110] - As of June 30, 2025, the platform had processed 1.8 billion expense transactions[110] Key Platform Metrics | Metric | Three Months Ended June 30, 2025 | | :----- | :------------------------------- | | Paid members (average) | 652,000 | | Companies (average) | 42,800 | MACROECONOMIC TRENDS The company's business is sensitive to economic conditions, with elevated inflation, potential recession, and trade issues creating uncertainty and potential negative impacts - Business operations are dependent on the overall economy, with potential negative impacts from slower economic growth and recession[111] - Elevated inflation rates, further inflation risk, and tariff/trade issues contribute to economic uncertainty[111] Components of Results of Operations Revenue is primarily from subscription fees and interchange revenue, with costs including hosting and processing, and operating expenses covering R&D, G&A, and Sales & Marketing - Revenue is primarily from subscription fees for cloud-based expense management, based on active members and service level[112] - Interchange revenue from the Updated Card Program is recognized on a gross basis, while cashback rewards are recorded as contra revenue[115][116] - Sales and marketing expenses are expected to decrease quarter-over-quarter due to a one-time charge related to the F1® The Movie sponsorship in Q2 2025[122] Results of Operations The company reported increased net losses of $8.79 million (3 months) and $11.96 million (6 months), driven by a 367% surge in sales and marketing expenses Consolidated Results of Operations | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $35,764 | $33,288 | $71,838 | $66,823 | | Gross margin | $18,577 | $18,925 | $36,819 | $37,876 | | (Loss) income from operations | $(10,338) | $219 | $(11,825) | $(1,574) | | Net loss | $(8,788) | $(2,764) | $(11,957) | $(6,545) | | Net loss per share (Basic and diluted) | $(0.10) | $(0.03) | $(0.13) | $(0.08) | - Sales and marketing expenses surged by $11.27 million (367%) for the three months and $11.43 million (177%) for the six months ended June 30, 2025, largely due to F1® The Movie sponsorship advertising[126] - Research and development expenses decreased by 19% (3 months) and 15% (6 months) due to increased focus on sales and marketing efforts[126] COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2025 AND 2024 Revenue increased by 7% to $35.76 million, but a 367% surge in sales and marketing expenses led to a net loss of $8.79 million for the three months Three-Month Financial Performance Comparison | Metric (in thousands) | 2025 (3 months) | 2024 (3 months) | Change (Amount) | Change (%) | | :-------------------- | :-------------- | :-------------- | :-------------- | :--------- | | Revenue | $35,764 | $33,288 | $2,476 | 7% | | Cost of revenue, net | $17,187 | $14,363 | $2,824 | 20% | | Gross margin | $18,577 | $18,925 | $(348) | (2)% | | Gross margin % | 52% | 57% | | | | Research and development | $5,158 | $6,389 | $(1,231) | (19)% | | General and administrative | $9,411 | $9,245 | $166 | 2% | | Sales and marketing | $14,346 | $3,072 | $11,274 | 367% | | Other income (expenses), net | $889 | $(260) | $1,149 | (442)% | | Benefit from (provision for) income taxes | $661 | $(2,723) | $3,384 | (124)% | - The increase in revenue was primarily due to interchange revenue from the Updated Card Program, partially offset by decreased billable activity and increased cashback rewards[127] - The significant increase in sales and marketing expenses was due to advertising for the F1® The Movie title sponsorship[132] COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2025 AND 2024 Revenue increased by 8% to $71.84 million, but a 177% surge in sales and marketing expenses resulted in a net loss of $11.96 million for the six months Six-Month Financial Performance Comparison | Metric (in thousands) | 2025 (6 months) | 2024 (6 months) | Change (Amount) | Change (%) | | :-------------------- | :-------------- | :-------------- | :-------------- | :--------- | | Revenue | $71,838 | $66,823 | $5,015 | 8% | | Cost of revenue, net | $35,019 | $28,947 | $6,072 | 21% | | Gross margin | $36,819 | $37,876 | $(1,057) | (3)% | | Gross margin % | 51% | 57% | | | | Research and development | $10,516 | $12,318 | $(1,802) | (15)% | | General and administrative | $20,240 | $20,676 | $(436) | (2)% | | Sales and marketing | $17,888 | $6,456 | $11,432 | 177% | | Other income (expenses), net | $1,213 | $(1,214) | $2,427 | (200)% | | Provision for income taxes | $(1,345) | $(3,757) | $2,412 | (64)% | - The increase in revenue was primarily due to interchange revenue from the Updated Card Program, partially offset by decreased billable activity and increased cashback rewards[136] - The significant increase in sales and marketing expenses was due to advertising for the F1® The Movie title sponsorship[141] Liquidity and Capital Resources As of June 30, 2025, Expensify had $60.5 million in cash, no outstanding debt, and a $7.5 million letter of credit, believing existing resources are sufficient - As of June 30, 2025, the company had $60.5 million in cash and cash equivalents and no outstanding indebtedness[145] - The $25.0 million revolving credit facility was terminated on July 1, 2025, and the $7.6 million amortizing term mortgage was fully repaid in August 2024[152][159] - A $7.5 million letter of credit remains outstanding, secured with cash collateral[145][154][159] Key Business Metrics and Non-GAAP Financial Measures Average paid members decreased to 652,000, while Adjusted EBITDA and Non-GAAP net income declined, and free cash flow increased for both periods Paid Members | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | | Paid members (in thousands) | 652 | 684 | Non-GAAP Financial Measures | Non-GAAP Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted EBITDA | $(1,393) | $10,190 | $7,053 | $17,304 | | Adjusted EBITDA margin | (4)% | 31% | 10% | 26% | | Non-GAAP net (loss) income | $(1,861) | $5,617 | $2,960 | $9,360 | | Non-GAAP net (loss) income margin | (5)% | 17% | 4% | 14% | | Free cash flow | $6,311 | $5,718 | $15,415 | $10,910 | | Free cash flow margin | 18% | 17% | 21% | 16% | - Adjusted EBITDA and Non-GAAP net income decreased significantly year-over-year for both the three and six-month periods, reflecting the increased net loss[168][170] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in the company's market risk were reported from previous disclosures - No material changes in market risk were reported compared to the 2024 Annual Report[183] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were deemed effective at a reasonable assurance level as of June 30, 2025[184] - No material changes in internal control over financial reporting occurred during the period[185] Part II - Other Information This part covers legal proceedings, risk factors, equity sales, and other miscellaneous disclosures Item 1. Legal Proceedings The company is involved in a securities class action and three shareholder derivative lawsuits, which it intends to vigorously defend - A putative securities class action (Wilhite v. Expensify, Inc., et al.) was filed in November 2023, alleging false or misleading statements in IPO offering documents[187] - Three shareholder derivative lawsuits (O'Halloran Action, Da Silva Action, Choi Action) have been filed, consolidated, and stayed, asserting similar claims against directors and officers[188][189][190] - The company intends to vigorously defend against all legal claims and denies allegations of wrongdoing[187][189][190] Item 1A. Risk Factors No material changes to the company's risk factors were reported compared to previous filings - No material changes to risk factors were reported compared to previous filings[192] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,285,336 shares for $3.0 million under the 2025 Share Repurchase Program, with $47.0 million remaining authorized Share Repurchase Activity | Period | Total Shares Purchased | Weighted Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Programs | Maximum Dollar Value Remaining Under Program (in thousands) | | :----- | :--------------------- | :------------------------------------ | :------------------------------------------------------ | :---------------------------------------------------------- | | May 1 - 31, 2025 | 478,307 | $2.32 | 478,307 | $48,890 | | June 1 - 30, 2025 | 807,029 | $2.34 | 807,029 | $47,000 | | Total (3 months) | 1,285,336 | $2.33 | 1,285,336 | $47,000 | - The 2025 Share Repurchase Program, authorizing up to $50.0 million, had $47.0 million remaining as of June 30, 2025[194] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported - No defaults upon senior securities were reported[195] Item 4. Mine Safety Disclosures No mine safety disclosures were reported - No mine safety disclosures were reported[196] Item 5. Other Information No other information was reported - No other information was reported[197] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from executive officers and Inline XBRL documents - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL documents[198] Signatures The report was signed by David Barrett (President and CEO) and Ryan Schaffer (CFO) on August 7, 2025 - The report was signed by David Barrett (President and CEO) and Ryan Schaffer (CFO) on August 7, 2025[203]