Expensify (EXFY) Q1 2025 Earnings Call May 08, 2025 05:00 PM ET Company Participants Niki Wallroth - Senior Project ManagerRyan Schaffer - CFO & DirectorDavid Barrett - Founder and CEOAaron Kimson - Vice President Conference Call Participants George Kurosawa - Equity Research Analyst Niki Wallroth All the information presented on today's call is unaudited, and during the course of this call, management may make forward looking statements within the meaning of the federal securities laws. These statements ar ...

Expensify (EXFY) Q1 2025 Earnings Call May 08, 2025 05:00 PM ET Company Participants Niki Wallroth - Senior Project ManagerRyan Schaffer - CFO & DirectorDavid Barrett - Founder and CEOAaron Kimson - Vice President Conference Call Participants George Kurosawa - Equity Research Analyst Niki Wallroth All the information presented on today's call is unaudited, and during the course of this call, management may make forward looking statements within the meaning of the federal securities laws. These statements ar ...

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]

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]