Expensify(US:EXFY)2021-12-22 16:00Membership and User Growth - As of September 30, 2021, Expensify had 667,000 paid members, a 5.4% increase from 633,000 paid members in the same quarter of 2020[290] - The average number of paid members declined by 15% from 742,000 in Q1 2020 to 633,000 in Q3 2020, but rebounded to 667,000 by Q3 2021[284] - For the nine months ended September 30, 2021, approximately 58% of revenue was attributed to instances where an employee used the application before the purchaser[269] Financial Performance - Revenue for the three months ended September 30, 2021, was $37,447,000, a 73% increase from $21,694,000 in the same period in 2020, primarily due to a pricing change and increased demand for business travel[314] - Revenue increased by $40.1 million, or 64%, for the nine months ended September 30, 2021, compared to the same period in 2020, attributed to updated terms of service and pricing changes[329] - Gross margin for the three months ended September 30, 2021, was 51%, down from 61% in the same period in 2020, driven by the higher rate of increase in cost of revenue compared to revenue growth[318] - Gross margin increased to 67% for the nine months ended September 30, 2021, compared to 62% in the same period in 2020, driven by the significant revenue increase[334] Expenses - Cost of revenue, net increased by $9,754,000, or 116%, for the three months ended September 30, 2021, reaching $18,197,000 compared to $8,443,000 in the same period in 2020[315] - Research and development expenses for the three months ended September 30, 2021, were $2,167,000, slightly down from $2,268,000 in the same period in 2020[310] - Sales and marketing expenses increased significantly to $7,608,000 for the three months ended September 30, 2021, compared to $1,491,000 in the same period in 2020[310] - General and administrative expenses rose to $18,333,000 for the three months ended September 30, 2021, up from $14,579,000 in the same period in 2020[310] - Research and development expenses increased by $3.5 million, or 75%, for the nine months ended September 30, 2021, compared to the same period in 2020, mainly due to discretionary cash bonuses[335] - Sales and marketing expenses increased by $6.7 million, or 86%, for the nine months ended September 30, 2021, compared to the same period in 2020, driven by increased advertising spend and cash bonuses[336] - General and administrative expenses increased by $11.1 million, or 45%, for the nine months ended September 30, 2021, compared to the same period in 2020, primarily due to increased compensation and discretionary cash bonuses[338] Net Loss and Adjusted EBITDA - The net loss attributable to common stockholders for the three months ended September 30, 2021, was $(6,345,000), compared to a net loss of $(6,938,000) in the same period in 2020[310] - Adjusted EBITDA for the nine months ended September 30, 2021, was $16.4 million, with an adjusted EBITDA margin of 16%, compared to $16.6 million and 27% for the same period in 2020[345] Cash Flow and Financing - Cash provided by operating activities was $34.6 million for the nine months ended September 30, 2021, primarily driven by net income and increases in accrued expenses related to discretionary cash bonuses[355] - Cash used in investing activities was $7.0 million, primarily for the purchase of property and equipment and software development costs[358] - Cash provided by financing activities was $17.6 million, primarily from proceeds of an amended loan agreement and stock option exercises[360] - The company intends to use a portion of the net proceeds from its IPO to pay approximately $27.8 million in remaining discretionary cash bonuses to employees[353] Debt and Compliance - The company has a $75.0 million term loan agreement with CIBC, which includes a $45.0 million initial term loan and a $25.0 million revolving line of credit[363] - As of September 30, 2021, the outstanding balance of the 2021 amended term loan was $44.9 million, and the revolving line of credit was $15.0 million[366] - The company must maintain a total annual recurring revenue leverage ratio not to exceed 0.8 to 1.0 for the first year, and a total EBITDA net leverage ratio of not less than 5.00 to 1.00 from September 30, 2022, through June 30, 2023[368] - As of September 30, 2021, the company was in compliance with all debt covenants[370] Revenue Recognition and Accounting - The company recognizes revenue monthly based on the number of monthly members and contractual rate per member[382] - Stock-based compensation costs are recognized on a straight-line basis over the requisite service period, generally four years[394] - No income tax benefit has been recognized relating to stock-based compensation expense during the three months and nine months ended September 30, 2021[399] Market and Economic Factors - The impact of COVID-19 led to a temporary decline in business travel expenses, but the company anticipates increased platform usage as economies reopen[285] - The company does not believe inflation has materially affected its business, but significant inflationary pressures could harm operations and financial condition[410] - Interest rate changes could impact future net income and cash flows, but a hypothetical 10% change in interest rates would not materially affect consolidated financial statements[409] - A hypothetical 10% change in the value of the U.S. dollar relative to foreign currencies is not expected to materially impact cash flows and operating results[407]