Expensify(EXFY)2023-11-09 03:53Financial Data and Key Metrics - Revenue for Q3 2023 was $36.5 million, a 14% decrease YoY, driven by a decrease in user activity and economic headwinds [80][81] - Net interchange increased by 16% QoQ and 65% YoY, reaching $3.1 million, with the Expensify card being a significant growth driver [54][50] - Paid members stood at 719,000, with a notable uptick in October, indicating some recovery in subscription growth [54][59] - GAAP net loss was $17 million, while non-GAAP net loss was $6.7 million, and adjusted EBITDA was negative $3.5 million [99] Business Line Data and Key Metrics - The Expensify card continues to grow, with net interchange being a key revenue driver, expected to transition to a new revenue treatment by the end of 2024 [55][57] - The company is focusing on improving the conversion of free trials to paid adoption, which is already best-in-class for SaaS products [64] - The introduction of new features like invoicing, bill pay, and payroll is aimed at increasing customer retention and scaling usage [36] Market Data and Key Metrics - The company is seeing growth in international markets, particularly in the UK, Europe, Canada, and Australia, where tax capabilities are integrated [8] - The small business segment (1-250 employees) remains a key focus, with the majority of end users working at small companies [28][29] - The company is leveraging digital advertising and SEO to capitalize on inbound momentum, especially for the upcoming Expensify 2.0 launch [73] Company Strategy and Industry Competition - The company is transitioning to a subscription-driven, bottom-up acquisition model, which is better suited for the small business market [27][29] - Expensify 2.0 is being developed to engage end users more effectively, with a focus on activating free users sooner and improving the onboarding experience [17][44] - The company is sunsetting its outbound sales program, focusing instead on digital advertising and onboarding specialists to improve ROI [48][152] Management Commentary on Operating Environment and Future Outlook - Management noted a challenging environment for SMB customers due to economic headwinds and high interest rates, which has impacted user activity [58][81] - The company expects to be free cash flow positive in 2024 and beyond, driven by cost reductions and the transition to the new Expensify card program [84][60] - Management is optimistic about the future, citing green shoots in the market and the upcoming launch of Expensify 2.0 as key growth drivers [86][87] Other Important Information - The company has reduced its debt by $36 million, which is expected to save $3.8 million in fiscal year 2024 [103] - Expensify 2.0 is expected to launch soon, with a focus on engaging end users through new viral loops and collaboration features [37][113] - The company is working on improving gross margins by reducing COGS in 2024, although no specific target has been provided [112] Q&A Session Summary Question: What is driving the optimism for "clear skies emerging"? - Management cited the upcoming revenue benefit from the Expensify card and the near-launch of Expensify 2.0 as key reasons for optimism [86][87] Question: What areas will see expense reductions in 2024? - Expense reductions will focus on S&M, G&A, and R&D, with a shift towards more efficient digital advertising and community-driven development [89][108] Question: How is the company addressing the decline in activity-based users? - The company is focusing on increasing subscriptions and improving the conversion of free trials to paid adoption, while also introducing new features to retain customers [91][92] Question: What is left to bring Expensify 2.0 to market? - The company is iteratively launching features at conferences to gather feedback, with the full viral adoption flow expected to launch soon [94][113] Question: How is the competitive environment shifting? - Competitors are starting to introduce paid plans, which is seen as a positive shift for Expensify, as it validates the company's business model [119][132] Question: What is the timeline for the transition to the new Expensify card program? - The transition is expected to start in Q4 2023 and be completed by the end of 2024, with a phased approach to avoid disrupting customers [57][142] Question: How is the company addressing churn? - The company is focusing on retaining customers by improving the onboarding experience and introducing new use cases to increase engagement [167][170] Question: What is the strategy for sunsetting the old Expensify platform? - The company will allow customers to switch between the old and new platforms, gathering feedback to improve the new product before fully sunsetting the old one [151][163]