Expensify, Inc.

by a huge measure outpace enterprise companies and their employees. But it's not just that the market is huge in the small and medium business space. It's also that it's largely greenfield. They're not using any kind of tool today. They're using Excel and manual processes. And what you really just need to do is convince them that using Expensify is a better use of their time and resources. But the challenge is most of the market, all of our competition is operating with a top down sales driven acquisition model. What this means is if they try to go to market and pick off one small business after another in order to acquire them, they can't do it scalably. They can't do it profitably. It just doesn't work. Next slide. And this is where our acquisition model comes in. So we have a bottom up acquisition model. And why is that interesting? We market a very consumer grade product to end users for employees. These employees have a very real pain point that none of the other competitor applications out there are targeting or trying to solve. What this means is we make the employee's life better for free and they can adopt us without asking their company for permission. And this motivates them to talk about us to their colleagues. It motivates them to talk about us to their managers and sell us up into their company. And that's how we grow. We grow bottom up. So we have this very scalable, very profitable business model that can use word of mouth and viral legion to pick off small business after small business in a manner that we can acquire this large untapped market opportunity over time. Next slide. So to recap, we are one of the few free applications out there that is consumer grade and can be sold to employees who can adopt us without asking their companies for permission. But then once we are sold up into the company, as that company grows, we have enterprise scale and we have global reach. We can continue to scale with that growing company, and they never need to leave us, and we can retain them forever. And, you know, combined, the fact that we free consumer grade, but we have enterprise reach and global scale is why you should believe in us. Next slide. So you've seen this slide many times as well, but I just want to remind you that this is our roadmap. and largely the only thing that's changed here over time, like since we went public, is the fact that more and more of these features have gone from gray, which means it's in development, to green, which means it's in beta, to blue, which means it's launched. So the way to read this slide is go left to right and everything that is on the far left are consumer grade viral lead gen features and helps us sort of continue to grow user base on the free product. And then as you go right, you see more and more enterprise-grade features. And taken together, this allows us to hit the market really hard, acquire them profitably, and then keep on growing with them such that we can build on our transactional and subscription revenue with companies as they keep growing as well. So that's a recap on business strategy and why we are who we are and why our business is built for the long haul. With that said, I'm going to hand it back to Ryan.

Great. Thank you, Anu. So let's talk about some 2022 highlights. We had strong growth despite some tough headwinds. So Expensify remains resolute despite the economy. As everyone knows, if you're watching the headlines, a lot of companies are laying off employees. Some companies are pivoting. They're changing their business model. They're go-to-market. At Expensify, we are steadfast in an economic storm. We're hiring. We've been hiring the entire time since the pandemic. We continue to hire. We're generating a lot of excess cash. We have $1.2 million in revenue per employee, which is quite high. We're also just focused on the future. We're still executing the same plan. We're not changing. If the economy gets shaky, we don't need to pivot into something completely different. We just keep moving forward. And as you know, we've been buying back shares as well. So some of the things that we did in 2022 that we want to talk about is that we spent a lot of energy supercharging the accounting channel. and people always ask, okay, why accountants? Why accounting firms? Why SMB accounting firms? So one thing that's important to note is even a small accounting firm is an enterprise-sized opportunity. Each firm has dozens of accountants. Each accountant has dozens of SMB clients. Each of the SMB clients has multiple employees. In some cases, a lot of employees. So when you add up all the employees managed by or in all the customers of the accounting firm managed by all the accountants, Even a small firm can be a very large revenue opportunity for us. Some things we did to help supercharge the accounting channel is we announced the Expensify CPA card with accountant-specific perks. We have assigned partner managers to the 500 largest partner firms, which is over half of all of our partner revenue, which is now overseen by a partner manager. And we've announced ExpenseCon 3, where we're bringing together 100 of the top minds in accounting. And you may have seen our announcement that we're going to have a headline speaker, George Clooney. So we're very excited about that. The previous two ExpenseCons have been very successful for us, and we're excited for ExpenseCon 3. And to meet Mr. Clooney. Now let's talk about how we've supercharged our sales efforts. So we have scaled our account managers so that nearly all revenue is now overseen by an account manager. We've added onboarding phone support so all customers that want to talk to someone through the onboarding process can get a response within two minutes or less and be on the phone with them very quickly. Most customers did self-service, and if you wanted to call, you kind of had to be a larger customer. At this point, anyone that wants to get on the phone can get on the phone, and they can get on the phone quickly, which has been a great development for us. We've also created an outbound SDR program. This is something that didn't exist at all, and now we've built that, so it's kind of a zero-to-one type of function, and we're working with multiple vendors built to scale that SDR program efficiently. This might be new to some people, but we're also supercharging what we call our contributor community. So we talk a lot about Expensify Chat, and it's this new platform we're building, and we're building it on a programming language called React Native. And we made the very exciting decision to open source that, which means external engineers can work on Smith, Expensify Chat. And what we've done is something very unique is that we are paying these open source contributors. Normally in open source, it's just volunteer work. So we have, it's transformed how we work. So our internal engineers, which are incredible, incredible people, they will design a feature, break it out into little pieces, they post those pieces into Upwork, and then very quickly, within minutes, we'll have five, 10 proposals, and then our engineers then project manage all these contributors working together and they're able to ship features much more quickly, much more efficiently. And we think it's pretty unique. It's not really done by many people and certainly not in a paid manner like we're doing. So this is, we think, over the long term, going to be a very competitive advantage for us. And we currently have hundreds of React Native engineers active in our contributor community. And in 2022, we paid out over a million dollars to those engineers. And if you're a React Native engineer listening to this, we'd love to work with you. So check it out. All right. So now let's get to 2022 and Q4 financial performance. We had a great year. In 22, we did $169.5 million in revenue. Our year-in-year revenue growth was 19%. on the Expensify card, the gross interchange was 6.8 million and the growth on the Expensify card was 118%. And just a reminder, that interchange is not included in that revenue number. We also generate a lot of cash. Our operating cash flow was 32.9 million. Our free cash flow was 26.3 million. We break out free cash flow from operating cash flow because we do hold on to some customer funds, and that's not really our money. We're just holding it, and it's basically in transit. So if you want to talk about the money that we actually generated, it's that free cash flow number, the $26.3 million. On a GAAP basis, we had a net loss of $27 million. Now, we've talked about this before. That is primarily driven by stock-based comp, and that stock-based comp is primarily driven by a pre-IPO grant we did that went effective on the IPO. And we get questions about this because the stock-based comp is quite high. You value a grant based on the value of the stock at the day of grant. So at that day of grant, it was $42 a share. So every share that vests as we record a $42 expense. So it is significantly higher than what the stock is right now, which can make the stock-based comp maybe look higher than what you're expecting. But as we've discussed in the past, that stock-based comp is decreasing over time. If you look at the earnings release, we have a forecast on how that is decreasing over time. Now if you take out stock-based comp, we have a non-GAAP net income of $25.3 million and adjusted EBITDA of $42.5 million, which are very healthy numbers. So we're very proud of our performance in 2022. Now let's talk about Q4. Q4 revenue was $43.5 million. Our average paid members were 779,000. Picard, we had gross interchange of $2 million with interchange growth year-on-year of 91%. We generated a lot of cash in Q4, too. It's kind of a theme with us. Our operating cash flow was $6.6 million, and our free cash flow was $6 million. In Q4, our GAAP net loss was $3.4 million. Again, this is driven primarily by the stock-based comp, which is driven by the grant that we discussed. And for the quarter, it was about $10 million. So when you take out the stock-based comp, our non-GAAP net income is $7.1 million, and adjusted EBITDA, $11.2 million. So as you might recall, we are currently not giving guidance, but we are giving information on the month that has happened thus far. In the past, we've disclosed that, and we're disclosing it here. One thing we've discussed in the past is that we have two types of users, and we've talked about this, but I get a lot of questions on this in the calls, so I want to make sure that we all understand. We have subscription-based users who are locked in for 12 months. They pay every month for 12 months. And then we have pay-per-use users, which are activity-based. So if they use it one month, they pay. If they don't use it the next, they don't pay. And they pay a higher price. Since the pandemic, we have seen the percentage of pay-per-use users as a percentage of all users increase substantially to about 35% of all users, which is higher than it's ever been, which has introduced a level of volatility in the revenue that we haven't seen before. and we've discussed this on the last fall. I've actually highlighted the last three Januaries on this chart in yellow and you'll see that volatility kind of show up. We usually have a good Q4 and then in January we see a drop in that and many more. So we're working on increasing the percentage of users on subscription as percentage of all users. because that will reduce the volatility. So we started working on this push for annual subscriptions in Q4, and I'm happy to report that we've already had some signs of early success. So in Q4, new users are trending more towards annual subscriptions versus pay-per-use. In previous quarters, if you look at new users, we were adding more pay-per-use users than subscription. In Q4, we reversed that trend. So I do think that we've started to see success in our efforts, and we expect that success to continue throughout 2023. and we are increasing subscription through a number of different ways. Our sales team is now focused on subscription instead of pay-per-use. Previously, the sales team, they were just focused on getting users and we didn't really care if they were subscription or pay-per-use. Now they're solely focused on subscription. Similarly, our account managers are also focused on converting customers with pay-per-use users to subscription, and they're prioritizing the customers that have the highest percentage of their employees on pay-per-use and working on getting those over to subscription. So the volatility is great when it goes up. Sometimes it goes down, and we would like to decrease the volatility in the revenue that we've been seeing. So the good news is that this isn't a – An impossible problem. It's very easy to solve. Movement motor subscription, we know how to do it. We have started doing it. It's showing success. So we think this volatility is a temporary issue that is easy to solve. It's just going to take some time to solve it, and we're already seeing progress. To summarize, in 22, we had steadfast performance in uncertain times. We had strong free cash flow, and we were profitable on an adjusted EBITDA basis in free cash flow. Our paid members continue to grow. The Expensify card's up nearly 120% from last year, and we have an exciting product roadmap that opens up more use cases among our customers. Now, we'll turn it over to Anu for Q&A, but before I hand it over to her, I wanted to highlight that we are now hosting a frequently asked questions and FAQ on our Investors Relations page. We get a lot of emails from investors, institutional and retail, Schaffer to investors at Expensify.com. And a lot of them are the same questions. So we're going to just start posting those questions on that page with answers. So if you have questions for us, please email investors at Expensify.com. We will post your answers and sorry, your questions and our answers on that page. And we'll be updating that throughout the quarter. So that's a great page to check out if you're curious about Expensify and you have questions maybe we didn't answer in this call. So Anu, if you want to kick off the Q&A.

Amazing. So first up, we have Koji from Bank of America, please.